Rhodotorula is a group of pigment-producing yeasts well known for its intracellular biosynthesis of carotenoids such as β-carotene, γ-carotene, torulene and torularhodin. The great potential of carotenoids in applications in food and feed as well as in health products and cosmetics has generated a market value expected to reach over $2.0 billion by 2022. Due to growing public concern over food safety, the demand for natural carotenoids is rising, and this trend significantly encourages the use of microbial fermentation for natural carotenoid production. This review covers the biological properties of carotenoids and the most recent findings on the carotenoid biosynthetic pathway, as well as strategies for the metabolic engineering methods for the enhancement of carotenoid production by Rhodotorula. The practical approaches to improving carotenoid yields, which have been facilitated by advancements in strain work as well as the optimization of media and fermentation conditions, were summarized respectively.