Dye decoloring peroxidases (DyPs) were named after their high efficiency to decolorize and degrade a wide range of dyes. DyPs are a type of heme peroxidase and are quite different from known heme peroxidases in terms of amino acid sequences, protein structure, catalytic residues, and physical and chemical properties. DyPs oxidize polycyclic dyes and phenolic compounds. Thus they find high application potentials in dealing with environmental problems. The structure and catalytic characteristics of DyPs of different families from the amino acid sequence, protein structure, and enzymatic properties, and analyzes the high-efficiency degradation ability of some DyPs in dye and lignin degradation, which vary greatly among DyPs classes. In addition, application prospects of DyPs in biomedicine and other fields are also discussed briefly. At the same time, the research strategy based on genetic engineering and synthetic biology in improving the stability and catalytic activity of DyPs are summarized along with the important industrial applications of DyPs and associated challenges. Moreover, according to the current research findings, bringing DyPs to the industrial level may require improving the catalytic efficiency of DyP, increasing production, and enhancing alkali resistance and toxicity.