A high quality chitosan for application in cosmetics can be produced from the processing waste of Northern shrimp (Pandalus borealis). A major fraction of the shrimp waste is protein tissues, which are normally wasted during conventional chitosan preparation. The present work shows that the shrimp waste proteins can be hydrolysed by a commercially available protease (Alcalase) and recovered as a protein hydrolysate with a high content of essential amino acids, before the scales are processed to chitosan. The Alcalase treatment had no adverse effect on either yield or quality of the chitosan. By this new method the total recovery of Kjeldahl nitrogen was 68.5% as compared with only 12.8% by the conventional method. In addition, a concentrate of astaxanthin was recovered in the sediment after centrifugation of the crude protein hydrolysate. This concentrate may be a valuable supplement in the feed to salmonid fishes.