The industrial production of barley shochu, a distilled alcoholic beverage, results in distillery waste that is currently incinerated or disposed of in landfills, causing environmental pollution. The supernatant of distillery waste contains organic matter such as proteins (similar to 2.5%) and amino acids (similar to 0.2%). This study demonstrates that the utilization of distillery wastewater as a sole nitrogen source enables a marine thraustochytrid, Schizochytrium sp. strain KH105, to propagate and accumulate valuable lipids including docosahexaenoic acid (DHA) and astaxanthin. Under optimized culture conditions, the highest DHA and astaxanthin yields were obtained at 3.4 g/l and 7.7 mg/l, respectively, after 4 or 5 d of cultivation in a 3-l jar fermentor. The chemical oxygen demand of the wastewater was reduced by 35%. About 67% of crude protein content and 85% of total free amino acid content also decreased in the culture supernatant. The thraustochytrid therefore serves to upgrade the distillery by-product to one containing value-added lipids for functional foods as well as to regulate the environmental contamination.