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A locally isolated white rot fungus Ganoderma Lucidum IBL‐05 was used for development of a bioremediation process for original textile industry effluents. Dye‐containing effluents of different colors were collected from the Arzoo (maroon), Ayesha (yellow), Ittemad (green), Crescent (navy blue) and Magna (yellowish) textile industries of Faisalabad, Pakistan. G. lucidum IBL‐05 was screened for its decolorization potential on all the effluents. Maximum decolorization (49.5 %) was observed in the case of the Arzoo textile industry (ART) effluent (λmax = 515 nm) on the 10th day of incubation. Therefore, the ART effluent was selected for optimization of its decolorization process. Process optimization could improve color removal efficiency of the fungus to 95% within only 2 days, catalyzed by manganese peroxidase (1295 U/mL) as the main enzyme activity at pH 3 and 35°C using 1% starch supplemented Kirk's basal medium. Nitrogen addition inhibited enzyme formation and effluent decolorization. The economics and effectiveness of the process can be improved by further process optimization.