A locally isolated fungus, Agaricus bitorqus A66, was used for the development of bioremediation process for synthetic solutions of direct dyes. In the initial screening study, the decolorization of four direct dyes, viz. NOVASOL Direct Black, NOVASOL Direct Blue GL, NOVASOL Direct Red 2BL and NOVASOL Direct Flavin, by Agaricus bitorqus A66 was investigated. Among the four dyes tested, Agaricus bitorqus A66 showed better performance on the decolorization (77.42%) of NOVASOL Direct Black as compared to other dyes on the fourth day of incubation. Various process parameters like pH, temperature, incubation time, carbon and nitrogen supplements and C/N ratios were optimized to achieve maximum decolorization of NOVASOL Direct Black by Agaricus bitorqus A66. The effect of redox mediators like ABTS, veratryl alcohol, MnSO4, guaiacol, etc. on enzyme activity and dye decolorization was also investigated. The process optimization resulted into enhanced dye decolorization and enzyme activity. Maximum dye decolorization (99.68%) and high lignin peroxidase activity (855 IU/mL) was achieved only in 5 h. Lignin peroxidase (LiP), which was found to be the major enzyme secreted by Agaricus bitorqus A66..