1,4-Dioxane (dioxane), a probable human carcinogen, often exists in industrial wastewater and domestic sewage. In this study, we applied 16S rRNA and metatranscriptomic methods to analyze the dioxane biodegradation mechanism by activated sludge. Tetrahydrofuran (THF) was added as an essential co-metabolite to promote the degradation of dioxane. We found the dioxane removal ratio increased with increasing THF concentrations. When the THF concentration increased from 60.0 to 200.0 mg/L, the dioxane degradation rate was stable. Three additions of ∼60.0 mg/L THF resulted in better dioxane degradation than one addition of 200 mg/L THF. Ammonia-oxidizing and denitrifying bacteria with methane monooxygenases (MOs) and ammonia MOs played the most important roles during the degradation of dioxane. Kyoto Encyclopedia of Genes and Genomes metabolic pathway and functional genes analyses showed that the activated sludge system was complex and stable when dioxane was added. In future studies, primers should be designed to identify specific bacteria and functional MO genes, which would help reveal the function of various bacteria and their MOs during dioxane degradation.