The reductive transformation and decolorization of two reactive phthalocyanine dyes (Reactive Blue 7, RB7; Reactive Blue 2 1, RB21) and a model phthalocyanine compound (phthalocyanine tetrasulfonic acid tetrasodium salt, PTSA) was investigated using pellet-supported, Pd-catalyzed H-2 reduction. The decolorization rates were described using pseudo-first-order kinetics. The RB7 decolorization rate increased with increasing catalyst concentration and decreasing dye concentration, but the dye removal was linearly proportional to the initial dye concentration. High salt and base concentrations, typically found in spent reactive dyebaths, significantly increased the rate of reaction. The rate of decolorization of RB21 was significantly higher than that of RB7 and PTSA. Sulfophthalainide, sulfophthalamic acid, and sulfophthalic acid were the major decolorization products identified by liquid chromatography/mass spectrometry (LC/MS). The acute Microtox (R) EC50 value of RB7 increased from 81 to 473 mg/L after treatment, indicating that dye decolorization by Pd-H-2 reduction leads to lower toxicity. The decrease in toxicity may be due to the combined effect of dye transformation and the observed dramatic decrease in free Cu, which was probably due to Cu complexation by the catalyst.