Phenolic compounds are manufacturing by-products commonly found in industrial wastewater. The toxicity of high level phenolic compounds in wastewater threatens not only the aquatic organisms, but also many components of the adjacent ecosystem. One of the major light harvesting pigments in cyanobacteria is phycocyanin which can be rapidly and specifically degraded by external stimuli such as nutritional depletion or environmental stress. We employed the cyanobacterium Anabaena sp. PCC 7120 as an indicator organism in estimating the pollution level by phenolic compounds. The phycocyanin content of the cyanobacterium decreased without significantly altering the total chlorophyll as the phenol concentration in a medium increased. We examined the phenol contamination level using the correlation of the phycocyanin content and the phenol concentration. Our results indicated that no significant pollution by phenolic compounds was found in several waterbodies in the vicinity of Daegu, South Korea.