A number of studies had shown biological treatment of pulp and paper mill effluent. However, almost all the studies have focused on reduction in physical and chemical parameters. Toxicity analysis, though very important, has been neglected. Thus in this study genotoxicity along with colour and lignin content were studied. Treatment of effluent, generated at the pulping stage in pulp and a paper mill, was done using two fungal strains, Cryptococcus albidus and Emericella nidulans var. nidulans, in sequential manner in 2?L bioreactor. Two different treatments were given. In treatment (I) effluent was first treated by C. albidus (stage A) and this treated effluent was further treated by E. nidulans var. nidulans (stage B). In treatment (II) effluent was first treated by E. nidulans var. nidulans (stage C) and this treated effluent was further treated by C. albidus (stage D). Treatment (I) was more efficient than treatment (II) with 71%, 51%, 44% and 70% reduction in colour, lignin, COD and genotoxicity, respectively. Class distribution of comets also showed that treatment (I) was more efficient than treatment (II). Colour content showed very good correlation (r2?=?0.99) with effluent toxicity. The effluent treatment process (I) can be scaled up for industrial use. (C) 2011 Canadian Society for Chemical Engineering