Removal of dye compounds from colour baths used in the textile industry is a possible application of nanofiltration. However, the mechanisms involved in this process are not clearly understood and the practical application of the process is facing many problems such as fouling and flux decline. The mechanisms of retention and flux decline were examined using two different approaches. Firstly, synthetic dye baths were prepared according to manufacterer's recipes. Retention of two reactive dyes (reactive blue 2 and reactive orange 16) was studied in separate baths and with different concentrations of Na2SO4, Na2CO3, NaOH and a surfactant. Different nanofiltration membranes (UTC-60, NF70 and NTR 7450) were used. The water flux in each of the experiments was monitored. It was found that the retention of ions decreased with the ion concentration due to a decrease of the Donnan potential. The retention of the dyes was high and was not influenced by the dye concentration or the ionic strength. The water flux was dependent of the ion concentration in the feed solution: high ion concentrations caused a dramatic decrease of the water flux. The dye concentration in the bath was found to have only a minor influence, whereas surfactants did not change water flux or dye retention. A theoretical explanation for these effects is given. The phenomenon of flux decline limits strongly the applicability of nanofiltration for direct treatment of dye baths. In a second step, an industrial wastewater from a textile factory was treated biologically in an active sludge system. The effluent was used as feed for nanofiltration with the same membranes as in the first step. The overall results for these experiments were satisfactory. The ion concentration was much lower than in the earlier experiments due to mixing of different feed streams. Therefore, the water fluxes were not considerably lower compared with the clean water fluxes. The retentions were sufficiently high to make recirculation of the treated water possible, thereby providing a considerable saving of water.