Sugar industry is one of the most important agro-based industries and is highly responsible for environmental pollution specially water pollution. In spite of stringent measures, may industries dispose untreated or partially treated effluent in nearby water bodies making water non potable and also affecting flora and fauna of aquatic environment. The available technologies for the treatment of effluent include aerobic, anaerobic and physicochemical methods. Microbial degradation is eco friendly treatment technology. In the present study effluent samples from three sugar industries located in Aurangabad district were selected. Physicochemical properties were studied. In this study, 22 fungi belonging to 12 genera and 10 bacterial species were isolated The sample having the highest BOD and COD was further selected for microbial treatment using Aspergillus ustus -a fungus and Pseudomonas aeruginosa- a bacterium under aerobic condition. The degradation of the effluent was monitored in terms of reduction in TDS and COD.