A number of experimental freshwater wetlands (150 m long × 75 m wide) with different ages since they were abandoned as rice fields, were used to analyze the prospects of multipurpose wetland restoration for such degraded areas. Nitrogen and phosphorus removal rate of the wetlands were determined monthly during the flooding season to estimate their efficiency as filters to remove nutrients from agricultural sewage. The number of wetland birds was recorded regularly to identify their habitat preferences. Both the temporal dynamics and changes in the spatial pattern of land use cover during the last 20 years were determined from aerial photographs and field analysis. All the wetlands appeared to be very efficient in the removal of nitrogen and phosphorus exported from rice fields. Usually 50–98% of the nitrogen and less than 50% of the soluble phosphorus were removed by the wetlands at any stage of restoration. Wetland birds preferred wetlands with intermediate plant cover for resting and sleeping activities better than rice fields and either very open wetlands or very dense ones with tall vegetation. Apart from the improvement in water quality and the restoration of natural habitats, restoration of wetland belts around lagoons will increase spatial heterogeneity and diversity of the landscape.