The application of halotolerant microorganisms capable of decolorizing is attractive. Decolorization mechanism, the effect of different parameters on the decolorization percentage, and toxicity analysis of Reactive Black 5 before and after decolorization were investigated in the present study. The decolorization percentage for live cells of Staphylococcus sp. strain MEH038S was more than dead cells, which demonstrated that Reactive Black 5 was decolorized through the degradation process. The results confirmed that an FMN‐dependent NADH‐azoreductase gene was responsible for the decolorization and then was identified as Staphylococcus sp. EFS01 azoreductase from a moderately halotolerant Staphylococcus strain for the first time. The maximal decolorization of 98.15% was observed at pH 6.5 and 35 °C for 50 mg/L of Reactive Black 5. In addition, more than 90% decolorization was achieved with 5–40 g/L of NaCl. The results of Gas chromatography–mass spectrometry and Fourier transform infrared spectroscopy showed that Reactive Black 5 was broken to the lower molecular weight compounds without any chromophoric azo groups. Phytotoxicity and fish toxicity proved that the biotransformed metabolites of Reactive Black 5 degradation were more toxic than the original dye. The moderate halotolerant strain exhibited a remarkable decolorization capability and can be applied for textile wastewater treatment. Practitioner Points An azoreductase gene from a moderately halotolerant Staphylococcus was identified. More than 90% decolorization efficiency was observed under high‐salt conditions. Biotransformed metabolites of RB5 degradation were identified. Toxicity analysis of biotransformed metabolites was investigated.