Azo dyes are attributed to be noxious to aquatic organisms impeding the endocrinal and metabolic phenomenon. Moreover, they are dwelled to exhibit carcinogenesis, teratogenesis and mutagenesis on humans and animals. Hence, this study explicitly targets on eradication of azo dye toxicity by microbial peroxidase as a robust tool. A novel peroxidase producing wetland isolate, Streptomyces coelicolor strain SPR7 was bioprospected. Computational prediction of chemical properties of synthetic azo dyes followed by molecular docking using Autodock software, to assess dock score, scrutinize binding site residues, binding mode and interactions between peroxidase and dyes viz. Diazin Green, Acid Red 2, Metanil Yellow, Basic Blue 9, Orange-G and Eriochrome Black T were achieved. Out of all the dyes, Eriochrome Black T prophesied the highest negative binding energy (-7.2 kJ/mol) and was further selected for biodegradation strategies by purified peroxidase, with molecular mass of 45 kDa. The purified peroxidase evinced a higher decolorization rate (94.21%) of Eriochrome Black T (100 ppm). Docking results of interaction between dye and peroxidase were corroborative with degradation percentage. UV–vis spectroscopy, HPLC, FTIR and GC–MS were performed for validating the biotransformation strategy. Moreover, the phytotoxicity analysis signified the mineralization of toxic dye, Eriochrome Black T into low toxic products. Hence, this study offers a directed streamline for textile industries, encouraging bio-economic prospectives. © 2019