Mycoremediation is an innovative biotechnology that uses living fungus for in situ and ex situ cleanup and management of contaminated sites. It is a cost effective process and the end products are non-hazardous. The process typically begins with field collection of fungi from a local area and continues with steps of culturing, screening, and preconditioning of native species to remediate specific contaminants. Industrial effluents entering into the surface waters are perhaps the most important sources of toxic contaminants in the environment. Textile is one of the largest industries which results in pollution contributed by untreated effluent discharge, which contains high concentrations of consumed metal based dyes, phenol, aromatic amines etc. The presence of metal based coloured dyes and foaming chemicals in textile waste water not only retards biological activity by reducing the light penetration but also causes metal toxicity to both aquatic and terrestrial life. There are various methods for the treatment of textile wastewater for the removal of dye. These broadly fall into three categories namely physical, chemical and biological. The biological treatment of effluent has become an economically and environmentally attractive alternative to the present physico-chemical methods of treatment. The major disadvantage of physico-chemical methods has been largely due to the high cost, low efficiency, limited versatility, interference by other wastewater constituents and the handling of the waste generated. Microbial decolourisation can be achieved by using various naturally occurring microorganisms such as bacteria, fungi and their enzymes. Use of fungi is economical and eco-friendly technique for the fine tuning of waste water treatment. Fungi have proved to be suitable organisms for the treatment of textile effluent and dye removal. The fungal mycelia have an additive advantage over single cell organisms by solubilising the insoluble substrates by producing extracellular enzymes. Due to an increased cell-to-surface ratio, fungi have a greater physical and enzymatic contact with the environment. Among the different fungi white- rot fungi play an important role for dye degradation. White rot fungi have been studied for nearly three decades and new species are being developed to decolourize various textile dyes with their lignin-degrading enzymes.