In the present study the decolorization and degradation of azo dye Direct Orange-16 by a potential bacterial isolate isolated from textile effluent was evaluated. Through 16S rRNA sequence matching the potential isolate was identified as Micrococcus luteus strain SSN2. The effects of various factors (pH, temperature, salt, dye concentration) on decolorization were investigated. The strain SSN2 had the ability to decolorize Direct Orange-16 with 96% efficiency at pH 8, 37°C and 3% NaCl in a short time of 6 h under static conditions. Direct Orange-16 decolorization was assessed by UV-vis spectrophotometer with gradual decrease of dye peak intensity at 430 nm (λmax). Analytical techniques (Thin Layer Chromatography, Fourier Transform Infrared Spectroscopy, High Performance Liquid Chromatography) further confirmed that biodegradation of Direct Orange-16 was due to reduction of the azo bond. The phytotoxicity assay (with respect to seeds of Vigna mungo and Vigna radiata) demonstrated the less toxic nature of the Direct Orange-16 degraded products compared to the toxic azo dye.