Physico-chemical and surface characterization of activated carbon prepared from groundnut shell, an abundantly available carbonaceous solid waste from oil processing mills in India, by chemical activation were carried out. The effect of various activation conditions viz. time, temperature and ZnCl2 / char ratio on the % yield of product and adsorption efficiency in terms of iodine number was studied. Changes in surface morphology of char before and after activation were examined by scanning electron microscopy which showed well developed pore structure in activated carbon demonstrating corrosive effect of ZnCl2. Surface modifications through chemical changes were studied by FTIR spectroscopy which showed considerable development and increase of surface functional groups in activated carbon as compared to char. The developed adsorbent was utilized for the removal of acid dye from aqueous solution and its adsorption capacity was found to be 55.5 mg/g of the adsorbent for 100 ppm initial concentration of dye solution. Adsorption parameters for Freundlich and Langmuir isotherm models were examined for dye adsorption and for the validity of models to analyze the equilibrium data, it was found that Freundlich model fitted better than Lmgmuir. The results indicate that Groundnut Shell based Powdered Activated Carbon (GSPAC) could be employed as low-cost alternative adsorbent to commercial activated carbon in the wastewater treatment for removal of acid dyes.