Oxygen availability has been identified as a major factor in governing the morphology of the lactose‐fermenting yeast, Kluyveromyces marxianus var. marxianus (formerly fragilis) NRRLy2415. In this particular strain, filamentous cells (F forms) predominate during the initial stages of aerobic propagation whilst budding yeast cells (Y forms) predominate during anaerobiosis. In other K. marxianus strains, and in Candida pseudotropicalis, budding cells predominate irrespective of oxygen availability. Increased cellular cytochrome contents and oxygen uptake rates accompanied Y to F (yeast to filamentous) transitions in K. marxianus NRRLy2415, suggesting that functional mitochondria are involved in controlling dimorphism in this yeast. This was further supported by the observation that respiratory inhibitors such as chloramphenicol prevented filamentation and promoted formation of respiratory‐deficient budding cells. During aerobic batch cultivation. K. marxianus displayed physiological variability in which cells were initially filamentous and respiratory but latterly were yeast‐like and fermentative, suggesting that growth rate as well as oxygen availability affected cell physiology. This was supported by the finding that during growth in lactose‐limited chemostat culture, the morphology and respiratory activity of K. marxianus varied with the specific growth rate of cells. In addition, the fermentation rates of F and Y forms varied, although maximum ethanol yields were not significantly different between the two morphologies. These results have implications for the more eflcient conversion of lactose to ethanol in commercial fermentations of cheese whey.