Water is an absolute need for all forms of life and human progress. However, the rapid industrialization and increasing global demand for textile products have led to a substantial rise in wastewater discharge from the textile industry, primarily due to dye production and application operations. Without adequate treatment, this effluent has the potential to become toxic, endangering the environment and all forms of life. Dyeing textiles have countless negative effects on aquatic environments, including altering their visual appeal, increasing biological and chemical oxygen demands (BOD and COD) levels, inhibiting photosynthesis and plant growth, and contributing to bioaccumulation and resistance. Traditional wastewater treatment methods, such as membrane separation, electrochemical processes, coagulation, adsorption, and activated sludge, have notable limitations, including high costs and inefficiencies. Developing an effective and sustainable technique for treating dyed wastewater and removing color is essential to address this issue. This review highlights the potential of microorganisms, particularly fungi, as innovative sustainable tools for treating dye-contaminated wastewater. Fungi offer multiple advantages, including low operational costs, environmental compatibility, and versatility through biosorption, bioaccumulation, and biodegradation. It also emphasizes the potential of hybrid and integrated treatment approaches to overcome the limitations of standalone methods. The findings underline the promising role of fungal systems as a sustainable and scalable solution for mitigating the environmental impact of textile dye pollution and preserving water resources.