Bright-red Laird’s Large tamarillo is a unique and under-utilised fruit that is a dietary source of carotenoids, vitamins C and E, and dietary fibre. The effects of the addition of freeze-dried tamarillo powder (5–15%) to milk and yoghurt starter either before (PRE) or after (POS) fermentation on physicochemical properties were examined. Using LC-MS and GG-MS, nutrient and volatile contents of tamarillo yoghurt were also examined. The addition of tamarillo prior to fermentation was associated with a more yellow colour and higher concentrations of tocopherol compared to when tamarillo was added after fermentation. Higher elastic modulus, PUFAs, pro-vitamin A content, and vitamin C retention were observed for POS than PRE. All tamarillo yoghurts showed improvement in syneresis, lower lactose content, and higher concentrations of antioxidant vitamins than the commercial premium-assorted fruits yoghurt from New Zealand Food Composition Data. Yoghurt fortified with tamarillo powder offers the potential for the development of a high-value nutritional product that could be a good source of vitamin C and a source of vitamin E and β-carotene, and maintain the volatiles that give tamarillo its distinctive flavour.