Aflatoxin B1 (AFB1), one of the most potent naturally occurring mutagens and carcinogens, causes significant threats to the food industry and animal production. In this study, 25 bacteria isolates were collected from grain kernels and soils displaying AFB1 reduction activity. Based on its degradation effectiveness, isolate N17-1 was selected for further characterization and identified as Pseudomonas aeruginosa. P. aeruginosa N17-1 could degrade AFB1, AFB2 and AFM1 by 82.8%, 46.8% and 31.9% after incubation in Nutrient Broth (NB) medium at 37 °C for 72 h, respectively. The culture supernatant of isolate N17-1 degraded AFB1 effectively, whereas the viable cells and intra cell extracts were far less effective. Factors influencing AFB1 degradation by the culture supernatant were investigated. Maximum degradation was observed at 55 °C. Ions Mn2+ and Cu2+ were activators for AFB1 degradation, however, ions Mg2+, Li+, Zn2+, Se2+, Fe3+ were strong inhibitors. Treatments with proteinase K and proteinase K plus SDS significantly reduced the degradation activity of the culture supernatant. No degradation products were observed based on preliminary LC-QTOF/MS analysis, indicating AFB1 was metabolized to degradation products with chemical properties different from that of AFB1. The results indicated that the degradation of AFB1 by P. aeruginosa N17-1 was enzymatic and could have a great potential in industrial applications. This is the first report indicating that the isolate of P. aeruginosa possesses the ability to degrade aflatoxin.