The effect of different metal ions and two redox mediators on laccase activity and laccase-catalyzed decolorization of five synthetic dyes was investigated in vitro using crude laccase from a novel white rot fungus Peniophora sp. (NFCCI-2131). The fungus effectively decolorized crystal violet and brilliant green on malt extract agar medium. Laccase activity was enhanced by metal ions such as Cd(2+), Mn(2+), Ni(2+), Co(2+), Na(+) Ca(2+), and Cu(2+). Among the different dyes tested, highest decolorization of crystal violet (96.30 %) was obtained in the presence of 1 mM ABTS followed by 86.01 % by HBT. The results conspicuously indicated that laccase from Peniophora sp. has the potential for color removal from textile dye effluent even in the presence of toxic metal ions.