Lignocellulose facilitates the fungal oxidization of recalcitrant organic pollutants through the extracellular ligninolytic enzymes induced by lignin in wood or other plant tissues. However, available information on this phenomenon is insufficient. Free radical chain reactions during lignin metabolism are important in xenobiotic removal. Thus, the effect of lignin on azo dye decolorization in vivo by Echinodontium taxodii was evaluated. In the presence of lignin, optimum decolorization percentages for Remazol Brilliant Violet 5R, Direct Red 5B, Direct Black 38, and Direct Black 22 were 91.75% (control, 65.96%), 76.89% (control, 43.78%), 43.44% (control, 17.02%), and 44.75% (control, 12.16%), respectively, in the submerged cultures. Laccase was the most important enzyme during biodecolorization. Aside from the stimulating of laccase activity, lignin might be degraded by E. taxodii, and then these degraded low-molecular-weight metabolites could act as redox mediators promoting decolorization of azo dyes. The relationship between laccase and lignin degradation was investigated through decolorization tests in vitro with purified enzyme and dozens of aromatics, which can be derivatives of lignin and can function as laccase mediators or inducers. Dyes were decolorized at triple or even higher rates in certain laccase–aromatic systems at chemical concentrations as low as 10 µM.