Bacteria capable of degrading the sulfonated azo dye Red HE7B were isolated from textile mill effluent contaminated soil. The most efficient isolate was identified as Bacillus sp. Azo1 and the isolate could successfully decolorize up to 89% of the dye. The decolorized cultural extract analyzed by HPLC confirmed degradation. Enzymatic analysis showed twofold and fourfold increase in the activity of azoreductase and laccase enzymes, respectively, indicating involvement of both reductive and oxidative enzymes in biodegradation of Red HE7B. Degraded products which were identified by GC/MS analysis included various metabolites like 8-nitroso 1-naphthol, 2-diazonium naphthalene. Mono azo dye intermediate was initially generated from the parent molecule. This mono azo dye was further degraded by the organism, into additional products, depending on the site of cleavage of R-N=N-R molecule. Based on the degradation products identified, three different pathways have been proposed. The mechanism of degradation in two of these pathways is different from that of the previously reported pathway for azo dye degradation. This is the first report of a microbial isolate following multiple pathways for azo dye degradation. Azo dye Red HE7B was observed to be phytotoxic, leading to decrease in root development, shoot length and seedling fresh weight. However, after biotreatment the resulting degradation products were non-phytotoxic.