Freshwater bodies and, consequently, drinking water treatment plants (DWTPs) sources are increasingly facing toxic cyanobacterial blooms. Even though conventional treatment processes including coagulation, flocculation, sedimentation, and filtration can control cyanobacteria and cell-bound cyanotoxins, these processes may encounter challenges such as inefficient removal of dissolved metabolites and cyanobacterial cell breakthrough. Furthermore, conventional treatment processes may lead to the accumulation of cyanobacteria cells and cyanotoxins in sludge. Pre-oxidation can enhance coagulation efficiency as it provides the first barrier against cyanobacteria and cyanotoxins and it decreases cell accumulation in DWTP sludge. This critical review aims to: (i) evaluate the state of the science of cyanobacteria and cyanotoxin management throughout DWTPs, as well as their associated sludge, and (ii) develop a decision framework to manage cyanobacteria and cyanotoxins in DWTPs and sludge. The review identified that lab-cultured-based pre-oxidation studies may not represent the real bloom pre-oxidation efficacy. Moreover, the application of a common exposure unit CT (residual concentration × contact time) provides a proper understanding of cyanobacteria pre-oxidation efficiency. Recently, reported challenges on cyanobacterial survival and growth in sludge alongside the cell lysis and cyanotoxin release raised health and technical concerns with regards to sludge storage and sludge supernatant recycling to the head of DWTPs. According to the review, oxidation has not been identified as a feasible option to handle cyanobacterial-laden sludge due to low cell and cyanotoxin removal efficacy. Based on the reviewed literature, a decision framework is proposed to manage cyanobacteria and cyanotoxins and their associated sludge in DWTPs.