Destroy cactus blocks in desert biomes and then plant it on sand.An it will grow.
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Green:Cook cactus in the furnace to produce "Cactus green".Lime green:Combine cactus green with bonemeal to get lime dye.See the related link below for the official Minecraft crafting guide.
Burn cactus in a furnace.
You have to put a cactus in a furnace and then apply the resulting dye to the wool.
You can 'smelt' it to create the dye, 'cactus green'. Or you can plant a block on sand to make more grow, which can make more dye, or be used as part of a trap, as it hurts mobs.
You have to make it the game doesn't make it