Abstract: The present invention generally relates to a system and method for treating spent caustic effluent using chlorine dioxide solution. The system comprises a spent caustic storage tank for receiving spent caustic obtained from refinery operations; an acid storage container connected to the spent caustic storage tank for neutralizing free alkali content with a mineral acid to eliminate unwanted chemical reactions associated with free caustic present in spent caustic with ClO2; a heat exchanger unit engaged for reducing temperature of spent caustic to 35-45° C. from high temperature raised due to heat of neutralisation at least one of a cavitation (mixing) chamber or venturi mixing equipment mechanically connected downstream of the heat exchanger unit for adding CIO solution to the spent caustic solution to oxidize sulphide/thiols content for complete reduction of sulphide/mercaptane and reduction of 80-90% of COD.