In this study, horseradish peroxidase C1A (HRP C1A) from Armoracia rusticana was expressed in Escherichia coli as an inclusion body. Subsequently, an active recombinant HRP C1A was obtained by refolding gradually using dilution-ultrafiltration. The recombinant HRP C1A was immobilized on agarose-chitosan hydrogel at 86.9 ± 2.5% of immobilization efficiency. After immobilization of the recombinant HRP C1A, the pH and temperature stability were improved and the reusability of the recombinant HPR C1A was achieved. The immobilized HRP C1A activity was retained above 80% after 6 cycles. The immobilized recombinant HRP C1A was used for the decolorization of four various dyes, including acid blue 129 (AB129), methyl blue (MB), methyl red (MR), and trypan blue (TB). The decolorization rates are all more than 70%, among which the decolorization effect of AB129 was the most significant (the decolorization rate was 76.3 ± 1.6%). Furthermore, a plausible decolorization pathway for AB129 was proposed based on the identified intermediates by ultraperformance liquid chromatography coupled with mass spectrometry (UPLC-MS). This is the first report of the putative mechanism on the decolorization of AB129 by HRP.