The performance of a laboratory scale membrane bioreactor (MBR) — utilizing a mixed microbial community dominated by fungi— for treatment of textile dye wastewater was investigated. A synthetic wastewater containing dye, starch (main contributor to total organic carbon, TOC) and other nutrients was used. Preliminary batch tests confirmed the superior decoloration capacity of pure fungus culture (Coriolus versicolor, NBRC 9791) as compared to that of conventional activated sludge. Simultaneous biosorption and biodegradation was evident in case of the fungus, while mainly biosorption was responsible for decoloration by activated sludge. On the other hand, activated sludge demonstrated comparatively faster TOC removal. Interestingly, stable removal of both color (over 99%) and TOC (over 98%) was achieved in the MBR under a hydraulic retention time (HRT) of 1 day. The difference of reactor-supernatant and membrane-permeate quality substantiated the significant contribution of the membrane to the overall dye removal (biosorption, cake layer filtration, biodegradation).