A red carotenoid-producing yeast, Rhodotorula acheniorum, was isolated from the sap of birch (Betula verricosus [B. pendula]) trees at Masseh Chal in the Taleghan village, Iran. The yeast has the abilities of both lactose assimilation and carotenoid production. The optimal conditions of culture were determined and maximum biomass and carotenoid production were 9.9 g/litre, and 29 µg/g, respectively. Chemical analyses of extracted carotenoids have shown that the major portion of the yeast consists of β-carotene, torulene and torularhodin. It is suggested that whey, a byproduct of cheese industries which has disposal problems, could by used as a substrate in the production of useful products such as carotenoids.