A new beta-carotene ketolase gene (crtW) was cloned from an environmental isolate Sphingomonas sp. DC18. A robust and reliable color screen was developed for protein engineering to improve its activity on hydroxylated carotenoids for astaxanthin production. Localized random mutagenesis was performed on the crtW gene including the upstream ribosomal binding site (RBS). Six mutations (H96L, R203W, A205V, A208V, F213L and A215T) in the crtW gene were isolated multiple times that showed improved astaxanthin production. These mutations were localized near the conserved histidine motifs, which were proposed for binding iron required for enzymatic activity. Combination of two of the mutations (R203W/F213L) further improved astaxanthin production. One mutation at the RBS (a438t) was shown to have additional effect on improving astaxanthin production. Most of the mutants still retained high activity on beta-carotene, however, the F213L single mutant and the R203W/F213L double mutant that yielded the highest improvement for astaxanthin production showed decreased activity for canthaxanthin production.