An easy, green and economically viable approach has been made to synthesize highly active and ordered structures of cobalt nanoparticles. The air stable nanoparticles were prepared from cobalt sulphate using tetra butyl ammonium bromide as surfactant and sodium borohydride as reductant. The cobalt nanocolloids in aqueous medium were found to be efficient as catalysts for the degradation of toxic organic dyes. Our present study involves degradation of methyl orange using cobalt nanoparticles and easy recovery of the catalyst from the system. The recovered nanoparticles could be recycled several times without loss of catalytic activity. Palladium nanoparticles prepared from palladium chloride and the same surfactant was found to degrade the organic dye effectively but lose their catalytic activity after recovery. Based on chemical and kinetic studies an attempt has been made to elucidate the mechanism of dye degradation using the nanoparticles.