The harmful effects of textile wastewater irrigation practices on the crop productivity and soil nutrient levels are primarily related with the accumulation of recalcitrant azo dyes in the soil. Therefore, toxicity assessment of the textile waste contaminated soil along with the development of a powerful soil bioremediation strategy is a challenging task for the researchers. Present study aimed to evaluate potential toxicity of the textile wastewater irrigated soil collected from Panki industrial site 5, Kanpur, India employing Ames Salmonella/mammalian microsome test, Escherichia coli DNA repair defective mutation assay and Allium cepa chromosomal aberration assay. The results of the Ames test and DNA repair defective mutation test showed that all the organic extracts of the contaminated soil samples induced different degrees of DNA damage, indicating the existence of mutagenicity and genotoxicity. Additionally, in A. cepa root cells, the contaminated soil altered mitotic index and caused chromosomal abnormalities. Results of the study demonstrated potential health risks related with the irrigation of textile wastewater. Keeping in view of the above scenario, the study led to the isolation and characterization of a novel indigenous bacterium capable of tolerating very high concentration of reactive black 5 dye (500 μg-mL−1) and salt (20 gL-1) with concurrently high efficiency of the dye degradation i.e., 93% decolorization at temperature of 37 °C and in pH range of 5–9. Based on the 16S rRNA gene sequencing, the bacterium was identified as Ochrobactrum intermedium. Further, dye degradation products were identified as sodium-2-hydrosulfonylethyl sulphate and sodium-3-aminonaphthalene-2-sulfonate by Gas Chromatography-Mass spectrometry; and this isolate can be exploited for bioremediation of textile waste contaminated soils.