Estuaries are crucial biogeochemical filters at the land–ocean interface that are strongly impacted by anthropogenic nutrient inputs. Here, we investigate benthic nitrogen (N) and phosphorus (P) dynamics in relation to physicochemical surface sediment properties and bottom water mixing in the shallow, eutrophic Peel-Harvey Estuary. Our results show the strong dependence of sedimentary P release on Fe and S redox cycling. The estuary contains surface sediments that are strongly reducing and act as net P source, despite physical sediment mixing under an oxygenated water column. This decoupling between water column oxygenation and benthic P dynamics is of great importance to understand the evolution of nutrient dynamics in marine systems in response to increasing nutrient loadings. In addition, the findings show that the relationship between P burial efficiency and bottom water oxygenation depends on local conditions; sediment properties rather than oxygen availability may control benthic P recycling. Overall, our results illustrate the complex response of an estuary to environmental change because of interacting physical and biogeochemical processes.