Water quality impairment by heavy metals and microbial organisms due to discharge of untreated industrial and/ or municipal effluent to surface water bodies has been a concern worldwide. Phytoremediation is relatively inexpensive and eco-friendly technique, and considered a viable alternative for wastewater purification. Present research work was designed to study the water quality of municipal effluent ponds and to evaluate the phytoremediation potential of native aquatic plants grown in studied ponds. For this purpose, a survey was conducted during the year 2012 and municipal effluent ponds were explored at six rural settings of Rawalpindi/ Islamabad. Water samples were collected from two different points at each pond i.e. inlet and center for analysis of physicochemical and microbiological parameters. Variation in water quality parameters were studied on the basis of size (large/ small), depth (shallow/ deep), sampling point (inlet/ center) and type of plants (emergent/ free floating) growing in ponds. Results showed that water quality of samples collected from center was relatively better than those at the inlet points as reduction was observed in physicochemical and microbiological parameters. The native aquatic plants were collected from each pond and identified as: (i) Typha latifolia L. (ii) Lemna minor L. and, (iii) Lemna gibba L. The Typha latifolia (Typhaceae) plants were growing in three ponds, whereas Lemna species (Lemnaceae) were growing in other three ponds. Typha latifolia, Lemna minor, and Lemna gibba were evaluated for phytoremediation of five heavy metals and three types of coliform bacteria by growing into untreated effluents viz., sewage mixed industrial effluent (collected from I-9 Industrial area, Islamabad) and municipal effluent (collected from Chak Shahzad Islamabad) for a period of 31 days in greenhouse experiments. Both water and plant samples were periodically (3rd, 10th, 17th, 24th, 31stday after transplanting) monitored xiv for heavy metals (Cd, Cu, Pb, Ni, Cr) while, water samples were also analyzed for indicator bacteria (total coliform, fecal coliform and E. coli). The untreated effluent samples were characterized for 24 water quality parameters i.e. physical, chemical and microbiological and compared with permissible limits. Results showed that municipal effluent was relatively highly contaminated with nutrients and organic load, whereas the concentration of heavy metals was relatively higher in sewage mixed industrial effluent. The number of coliform bacteria was same in both untreated effluents. Results of phytoremediation of wastewater effluent showed that there was a large reduction in heavy metals in both effluent during the experiments and a significant difference was observed between initial and final metals concentrations. The percentage metal decrease was relatively higher in sewage mixed industrial effluent and overall decrease for different heavy metals was higher than 55 %. Among plant tissues metal concentration, Pb accumulation was significantly higher than Cd, Cu and Ni. Maximum bio-concentration factors observed for Pb and Cu indicated the experimental plants as moderate accumulators of heavy metals. The reduction in coliform bacteria was higher in sewage mixed industrial effluent than those in municipal effluent and fecal coliform (and E.coli) were not detected in sewage mixed industrial effluent at experiments termination. The results concluded that native aquatic plants can be used for phytoremediation of contaminated water and has great potential for future applications.