Recycling and valorization of noxious dye contaminated industrial wastewater minimize prevailing agricultural water dearth. In this context, the current manuscript investigates and fabricates a rapid, ecofriendly, and cost effective treatment system using a potent dye degrading microbial agent. An agar plug immobilized Penicillium crustosum PWWS-6, a filamentous fungus isolated from veterinary clinical waste dump, for the first time reported to decolorize (81.86 ± 0.03 %) hazardous diazo dye, (Congo red, 100 ppm) in 24 h. Lignin peroxidase, azo reductase, veratryl alcohol oxidase, and NADH-DCIP reductase enzymes were induced significantly during mycoremediation bioprocess which is affected by incubation time, temperature, pH, inoculum volume, and dye concentration of aqueous medium. The one-factor-at-a-time (OFAT) and response surface methodology (RSM) were adopted to optimize these cultural parameters and generated optimized conditions (incubation time, 16 h; temperature, 27 °C; and inoculum volume, 6 fungal discs), for maximum degradation (99.85 %) of 100 ppm CR at pH 7.0. Further, using OFAT approach, P. crustosum also showed 72.14 % degradation of CR at much higher concentration of 1000 ppm in 72 h. UV–vis spectra verified complete disappearance of dye from colored broth. Fourier Transform Infrared (FTIR) spectroscopy along with Field Emission Scanning Electron Microscopy (FESEM) subsequently confirmed (–N=N–) bond destabilization following degradation. Furthermore, the non-toxic degraded metabolites showed improved percent germination, radical and plumule length of Cicer arietinum and Hordeum vulgare seeds compared with untreated CR contaminated wastewater.