Immobilized cells of Proteus vulgaris NCIM 2027 completely decolorized C.I. Reactive Blue 172 (50 mg/L) within 8 h along with a nearly 80% reduction in TOC and COD. The dye degradation efficiency of the immobilized cells was further improved by optimizing the physicochemical conditions, including agitation, temperature, pH, dye concentration, and biomass loading. Microbial toxicity study revealed the non-toxic nature of the degraded products. Repeated-batch decolorization was conducted to evaluate the reusability of the immobilized cells. The immobilized cells were used for continuous dye decolorization in a fixed bed bioreactor under different volumetric flow rates and dye feeding concentrations. In addition, the immobilized cells were applied to decolorize a mixture of seven reactive dyes in batch and continuous modes, resulting in efficient decolorization (in terms of ADMI value) and significant reduction in TOC and COD. This suggests the potential of using immobilized cells to treat dye-containing wastewater.