Produced water undergoes changes in its physical chemistry including precipitation of heavy metals after being discharged and mixed with ambient seawater. Potential impacts of the precipitation of heavy metals on their transport and toxicity were studied using samples from offshore oil production sites on the Scotian Shelf off eastern Canada. Concentrations of aluminum, cadmium, chromium, cobalt, copper, iron, lead, manganese, nickel and zinc were measured in total, particulate and dissolved fractions together with Microtox tests for assessment of toxicity. Heavy metals in produced water were transformed from dissolved to particulate phase in a period of hours under oxygenated conditions, and aggregated to larger particles that settle rapidly (>100 m/day) over a few days. In addition, there was production of buoyant particles comprised of heavy metal precipitates sequestered onto oil droplets that were transported to the surface. The particulate fraction was generally more toxic than the dissolved fraction. This was evident at the mixing interface between produced water and seawater where elevated particulate and toxicity levels were observed. Laboratory studies suggest an increase in the toxicity of discharged produced water over time. Time-series experiments showed a sustained toxic response for more than a week following the oxidation of freshly discharged produced water that initially elicited little or no toxic response in the Microtox test. Chemical processes identified in this study, namely precipitation of heavy metals and consequent settling and rising fluxes of particles, will influence the toxicity, the fate and the transport of potential contaminants in the produced water. Therefore, these processes need to be considered in assessment of the environmental impact associated with offshore oil and gas operations.