Nickel nanoparticles were synthesized and used to decolourize dye effluent. C. I. Reactive Blue 21 was taken as a reference dye, and polyvinyl pyrrolidone (PVP) was used as a stabilizer to prevent agglomeration of nanoparticles. Characterization of nanoparticles was done by a laser light scattering particle size analyzer, X-ray diffraction (XRD) analysis and transmission electron microscopy (TEM). Various parameters like pH, dye concentration, nanoparticle concentration, alkali addition, salt addition and duration studied for dye decolourization. To confirm the attachment of degraded products of dye on the nanoparticles, FT-IR analysis was done. About 98 % colour removal with simultaneous reduction in chemical oxygen demand (COD) was achieved.