Decades of eutrophication have deteriorated marine coastal habitats severely and has led to massive decline of eelgrass along European coastlines and impoverishment of benthic fauna. Although nutrient loadings were reduced and water quality increased decades ago, eutrophication in the past had enriched marine sediments in organic matter to an extent that is still affecting ecosystems today. Organic-rich sediments are readily resuspended, keeping shallow estuaries in a turbid state and benthic fauna communities remain low in density and diversity. Sand-capping of muddy sediments may restore such deteriorated estuaries and is in this study applied for the first time as a large-scale restoration approach. A 10 cm layer of sand was added on 1.0 and 1.4 ha muddy sediments at two locations in Odense Fjord, Denmark. The organic content of the mud at the sites was 8–9% and 3–5% before sand-capping. The sand-cap stabilized the mud without mixing the sand-mud interface, not even after one year. The associated lower resuspension of fine particle improved light conditions in the overlying water by up to 9 and 22% at the two locations. Benthic fauna recruitment improved after sand-capping, leading to a local shift from low to high diversity of the benthic community and increased ecosystem functionality.