Decabromodiphenyl ethane (DBDPE) can pose a potential toxic threat to human beings and the environment. P. ostreatus, as one of the typical white-rot fungi, can effectively degrade various refractory pollutants. The biodegradable characteristics of DBDPE by P. ostreatus, as well as the mechanisms, and toxicological response were investigated in this study. The removal rate reached 47.73% and 43.20%, respectively, for 5 and 20 mg/L DBDPE after 120-h degradation by P. ostreatus. As a coexisting substance, Pb could inhibit the biodegradation. It is found that both the intracellular enzyme (P450) and extracellular enzymes (manganese peroxidase (MnP), lignin peroxidase (LiP), and laccase (Lac)) played a very important role in the biodegradation of DBDPE, of which Lac dominated the degradation. The toxic response was monitored during the degradation. The activities of SOD and CAT were enhanced to eliminate excess ROS in P. ostreatus triggered by DBDPE. In addition, debromination, hydroxylation, and oxidation were inferred as the main degradation pathways preliminarily. The findings provide a theoretical basis for the application of microbial degradation of DBDPE contamination.