Various chemical compounds emerged including kraft lignin (KL) during the processes of papermaking. These chemical compounds in effluent of the paper industry have hazardous environmental impacts. KL is liable for causing pollution of aquatic and water bodies; hence, it must be minimized in order to maintain a healthy and sustainable environment. In the present study, KL degradation was performed with ligninolytic bacterium Serratia liquefaciens and we confirmed biotransformation of KL to various less polluted or harmless compounds. KL being degraded as 1000 mg/L–1 concentration with incubating 30°C for 72, 168, and 240 h, shaking at 120 rpm under laboratory conditions. We found 65% maximum degradation of KL and 62% decolorization by the treatment with S. liquefaciens for 240 h (10 days). After being the treatment of KL, clear changes were observed in its morphology (using scanning electron microscopy and stereo microscopy), hydrodynamic size (using dynamic light scattering), and the functional groups [using Attenuated Total Reflectance Fourier Transform Infrared Spectroscopy (ATR–FTIR)]. Biotransformation of KL monitored by Gas Chromatography–Mass Spectrometry (GC–MS) revealed formation of various metabolites. In addition to degradation of KL, detoxification (involving biotransformation into various metabolites) was assessed using cytotoxicity assays 3-(4,5-dimethylthiazol-2-yl)-2,5-diphenyltetrazolium bromide [MTT and calcein-acetoxymethyl (AM) assays] using a human kidney cell line (NRK-52E), which indicated improved cell survival rates (74% for the bacteria-treated KL solution treated for 240 h) compared to the control (27%). Thus, the present study suggests that bacteria S. liquefaciens might be useful in reducing the pollution of KL by transforming it into various metabolites along with cytotoxicity reduction for environmental protection.