Toxic effluents containing azo dyes are discharged from various industries which adversely affect water resources and ecosystem integrity. The objective of this study was to compare the toxicity of untreated as well as treated textile effluent with newly isolated Pseudomonas oleovorans PAMD_1 to Nile Tilapia (Oreochromis niloticus) as the test organism. The acute toxicity bioassay experiments were conducted to determine the median lethal dose (LD50) and hematological changes in O. niloticus. Hematological profile of O. niloticus showed significant elevation (p < 0.05) in RBC count (4.10; 5.42), Hb concentration (8.5; 14.3), and heamtocrit (9.0; 12.5) in the treated effluent when compared to the untreated. The textile effluent was also analyzed for physicochemical parameters, including BOD, COD, TDS, and color intensity prior to and after treatment with P. oleovorans PAMD_1 which showed a substantial reduction in BOD from 371 to 118 mg l−1 (68%), COD from 895 to 220 mg l−1 (76%), and TDS from 4400 to 3730 mg l−1 (15.2%).