Methylene Blue (MB) is one of the most extensively used synthetic dyes, which poses significant environmental hazards and health concerns due to its persistent nature and toxicity. Thus, removing MB from industrial effluents is crucial. This study focused on the fate of MB in activated sludge using laboratory-developed activated sludge reactors. The activated sludge bioreactors could remove >90 and >75% of MB at 10 and 20 ppm of MB concentrations, respectively. Further experiments were conducted to elucidate the mechanism of MB removal in activated sludge, which showed that biosorption plays a vital role in removing MB in activated sludge, with no clear evidence for biodegradation. Langmuir, Freundlich’s, and Redlich-Peterson adsorption models were applied to predict the biosorption behaviour, and the results showed a strong correlation between the observed and predicted values (R2 = 0.99). Fourier transform infrared (FTIR) spectroscopy analysis further confirmed the biosorption of MB in activated sludge. This research provides important insights into the optimization of the activated sludge process for dye removal and, thus, forms a framework for enhancing the efficiency of wastewater treatment systems. This investigation allows us to broaden our current knowledge regarding the interaction between synthetic dyes and biological processes for wastewater treatment and supports the development of better and more eco-friendly practices in managing wastewater.