Cultivation of Hypsizygus ulmarius to generate spent mycelium substrate (SMS) for dye decolourization gave better yield, biological efficiency, fruitwidth and moisture content (145 gm, 33%, 4 cm, 91%) on paddy straw as compared to coconut husk (59 gm, 21%, 3 cm, 90%). Solid-phase decolourization of Congo red (Azo dye) and Methylene blue (Heterocyclic dye) showed that maximum decolourization (3.31), measured as Decolourization Index, occurred at dye concentration of 25 mg l(-1), while in Solochrome black (Reactive dye), it was at 100 mg l(-1) (1.7). Time taken for maximum decolourization was 10 days in Congo red and Solochrome black; 20 days in Methylene blue. Decolourization Index was maximum in Methylene blue (3.1), followed by Congo red (1.9) and Solochrome black (1.2). Liquid-phase decolourization of Methylene blue and Solochrome black showed that maximum decolourization (62.5%) measured as percent decolourization occurred at 25 mg l(-1), while it was at 50 mg l(-1) (36%) for Congo red. Time taken for maximum decolourization for all three dyes was 10 days. During this period, the percent decolourization was maximum in Methylene blue (91.3%), followed by Solochrome black (82.2%) and Congo red (79.7%). Decolourization potential in solid-phase was observed till 100 mg l(-1) and day 25 for all the three dyes, however, in liquid-phase it was observed till 50 mg I(-1) and day 20 for Congo red, 75 mg l(-1) and day 10 for Solochrome black, 100 mg I(-1) and day 20 for Methylene blue. Maximum laccase was produced on day 25 during decolourization of 25 mg I(-1) Congo red, while maximum Manganese peroxidase was noted on day 20 at 50 mg l(-1) Congo red.