Currently, globalization, urbanization and industrialization have led to several environmental issues. In many industries, particularly in textile industries, the extensive use of synthetic dyes has increased. Dye is an integral element used to impart color to textile materials. Wastes generated during the processing and treatment of the dye contain inorganic and organic compounds that are hazardous, thereby posing a serious threat to the ecosystem. It is therefore important to implement cost-efficient and successful measures against these emissions in order to preserve habitats and natural resources. In this context, biodegradation by fungi or mycoremediation of dyes using potential fungi is a fairly inexpensive and environmental friendly method for decomposing or mineralizing barely or less decaying dye compounds. Fungi play a crucial role in degrading and decolorizing organic dyes by enzymes and processes such as absorption, adsorption and aggregation of effluent colorants. The factors affecting the decolorization and biodegradation of dye compounds through fungal bioremediation, such as pH, temperature, dye concentration, agitation, effects of carbon and nitrogen sources, dye structure, enzymes, electron donor and redox mediators are discussed in this review. The review also includes a summary on the mechanism and kinetics of dye degradation as well as recent advances and future perspectives in mycoremediation of dyes.