Effect of various parameters such as size of inoculum, temperature, carbon source on decolorization of textile wastewater by Phanerochaete chrysosporium was investigated. Textile wastewater decolorization occurred during the primary phase of growth and secondary metabolism in carbon and nitrogen limited medium, respectively. It was found that glucose concentration up to 0.3 g/l has considerable effect on decolorisation rate. Further, it was also found that the concentration of the organic nitrogen of the effluent stream was sufficient to furnish the decolorisation process. It was observed that the inoculum size in this case within 10% increased the decolorisation rate rapidly. It was found that the temperature rise from 20 to 38 °C enhanced the rate of decolorization. The optimum temperature for decolorisation was found to be about 35 °C. Effect of pH from 2–4 on decolorization was also investigated. It is concluded that using Phanerochaete chrysosporium, decolorization of the azo dye containing effluent of the textile industry was achieved to about 96% within 28 h of operation.