In the present study sequential anaerobic and aerobic treatment in two steps bioreactor was performed for removal of colour in the pulp and paper mill effluent. In anaerobic treatment, colour (70%), lignin (25%), COD (42%), AOX (15%) and phenol (39%) were reduced in 15 days. The anaerobically treated effluent was separately applied in bioreactor in presence of fungal strain, Paecilomyces sp., and bacterial strain, Microbrevis luteum. Data of study indicated reduction in colour (95%), AOX (67%), lignin (86%), COD (88%) and phenol (63%) by Paecilomyces sp. where as M. luteum showed removal in colour (76%), lignin (69%), COD (75%) AOX (82%) and phenol (93%) by day third when 7 days anaerobically treated effluent was further treated by aerobic microorganisms. Change in pH of the effluent, and increase in biomass of microorganisms substantiated results of the study, which was concomitant to the treatment method. (c) 2005 Elsevier Ltd. All rights reserved.