Among pollution causing various industries, textile industry creates a major attention by environmentalists due to consumption of large volume of water, dyes and chemicals for various processing of textiles. Textile effluents contain carcinogenic aromatic amines, dyes, organic and inorganic materials. Removal of colored compounds from textile industry effluents by biological methods is currently available. Recent promising research works on biological decolorization of textile effluent have showed that variety of microorganisms and plants capable of decolorizing wide range of anionic and cationic dyes. This review article deals with the dye removing efficiency of fungi through biodegradation and biosorption mechanism.