Abstract Textile industries are one of the high generators of synthetic dye effluent. Many of these dyes are recalcitrant in nature and accumulate in nature. Some of these are mutagenic and carcinogenic and responsible for many deleterious effects on human health. Most of the conventional oxidation technologies have their own limitations. The ultimate solution of this is the search of biological systems such as enzymatic oxidations with advantages of specificity, biodegradable and reactions carried out in mild conditions. Among different decolorizing enzymes, laccase is getting much attention in detoxification and bioremediation of these synthetic pollutants. The important obstacle to commercialize the bacterial laccases was lack of sufficient stock and cost to achieve cheaper production and alteration by chemical means to obtain more robust and active enzyme. They also carry limitations of high cost of isolation and purification, non reusability, the instability of their structures and their sensitivity to harsh process conditions. But these limitations can be overcome by the use of immobilized enzymes. The role of free living diazotrophs is well known in soil sustainability and increasing fertility by atmospheric nitrogen fixation. Their role in degradation of environmental pollutants is also documented. In current studies the efforts are made to isolate and screen for indigenous laccase producing free living diazobacteria. The 57 laccase producing free living diazobacteria were enriched, isolated using Burks Nitrogen Free media as selective media. The laccase producing ability of isolate was confirmed in the range of 0.003 – 0.031 U/L by Guiacol assay. The potent isolate (0.031 U/l) was identified as Klebsiella sp. with reference to Bergey’s manual of Determinative Bacteriology. The extracellular laccase enzyme was partially purified by neutral salt precipitation and dialysis. The extracellular enzyme was immobilized by entrapment method using calcium alginate beads. The immobilized potent diazobacteria showed 62% decolorization compared to 37% decolorization shown by free cells. The studies are in progress for application of enzyme in situ decolorization.