One of the most promising applications of chitosanase is the conversion of chitinous biowaste into bioactive chitooligomers (COS). TKU033 chitosanase was induced from squid pen powder (SPP)-containing Bacillus cereus TKU033 medium and purified by ammonium sulfate precipitation and column chromatography. The enzyme was relatively more thermostable in the presence of the substrate and had an activity of 93% at 50 °C in a pH 5 buffer solution for 60 min. Furthermore, the enzyme used for the COS preparation was also studied. The enzyme products revealed various mixtures of COS that with different degrees of polymerization (DP), ranging from three to nine. In the culture medium, the fermented SPP was recovered, and it displayed a better adsorption rate (up to 96%) for the disperse dyes than the water-soluble food colorants, Allura Red AC (R40) and Tartrazne (Y4). Fourier transform-infrared spectroscopic (FT-IR) analysis proved that the adsorption of the dyes onto fermented SPP was a physical adsorption. Results also showed that fermented SPP was a favorable adsorber and could be employed as low-cost alternative for dye removal in wastewater treatment.