The global ornamental fish trade is expanding in response to increased demand for indigenous fish on the global market, while exogenous carotenoids can improve colouration. The 60‐day trial investigated the effect of carotenoid supplementation, via Artemia, on colouration, growth and immunophysiology of Badis badis (dwarf chameleon fish). Carotenoid was enriched at 40 ppm (T1), 80 ppm (T2) and 120 ppm (T3) and compared with controls, C1 (unenriched) and C2 (oil‐enriched). Fish larvae (average weight 0.12 g) were fed enriched–unenriched Artemia in triplicates (5 × 3) in aquarium tanks (15 L). C1 and T2 had better skin colour (lightness and whiteness) in the posterolateral and caudal fins respectively. The value of redness (a*) in the anterolateral region was higher in T2 and T3 (p < 0.05). The anterolateral red index was higher (p < 0.05) in T2 and T3, whereas in the posterolateral and caudal fins, T1 and T2 were higher (p < 0.05). Compared to C1 and C2, the hue angle in carotenoid groups was found to be low (p < 0.05). No significant change in the growth performance was noticed (p > 0.05). Immune scores such as lysozyme and alkaline protease were highest in T3 (p < 0.05), whereas protease activity was highest in T2 (80 ppm). Stress biomarkers, viz., superoxide dismutase, catalase and malondialdehyde were low in groups fed enriched Artemia (p < 0.05). The integrated biomarker response means and star plot area were lower in the enriched groups (T1–T3), while T2 was the lowest. Overall findings reveal that dietary carotenoid improves the colouration and immune status, but fail to promote growth. Furthermore, 80 ppm enrichment dose improves the overall performance. The findings can help fish keepers improve fish colour and health status through carotenoid supplementation.