Benzothiazole-2-sulfonate (BTSO3) is one of the side products occurring in 2-mercaptobenzothiazole (MBT) production wastewater. We are the first to isolate an axenic culture capable of BTSO3 degradation. The isolate was identified as a Rhodococcus erythropolis strain and also degraded 2-hydroxybenzothiazole (OBT) and benzothiazole (BT), but not MBT, which was found to inhibit the biodegradation of OBT, BT, and BTSO3. In anaerobic resting cell assays, BTSO3 was transformed into OBT in stoichiometric amounts. Under aerobic conditions, OBT was observed as an intermediate in BT breakdown and an unknown compound transiently accumulated in several assays. This product was identified as a dihydroxybenzothiazole. Benzothiazole degradation pathways seem to converge into OBT, which is then transformed further into the dihydroxy derivative.