Textile dyeing effluents present a substantial environmental problem, primarily because such effluents contain high concentrations of waste dyes, dye-products, and variable salts. The stonewashing process for the degradation of blue indigo to create a 'faded' look in blue denim results in high concentrations of indigo dye waste in the resulting effluent and because indigo is very difficult to decompose biologically, the effluent ends up in the environment, raising aesthetic concerns and damaging the integrity of the receiving streams. Wastewater containing indigo is characterized by a moderate amount of chemical oxygen demand (COD), pH, suspended solids, dissolved solids and a dark blue color. Although color and COD are some of the important parameters monitored to meet effluent discharge standards, companies are discouraged from treating or recovering the waste dye by cost implications. We report on a simple and potentially cost-effective method of recovering indigo dye waste from the effluent through adsorption with palygorskite clay and subsequent conversion of recovery by-products into Maya blue, an organic-inorganic hybrid pigment with applications in the paint and coating industry. The production of a secondary commercial product from waste stream through a by-product synergy process offers an attractive alternative to discharging the untreated effluent into municipal treatment plants or the environment.