A numerical study has been carried out for free convection in a vertical cylindrical annulus filled with a porous medium and whose inner wall is isothermally heated and the outer wall is isothermally cooled, the horizontal walls being insulated. The porous medium is assumed to be both hydrodynamically and thermally anisotropic. Numerical results are reported for 0.1 ≤ K*≤ 10, 0.1 ≤ λ ≤ 10,1 ≤ A ≤ 20,2 ≤ Rr ≤ 20, and Ra*≤ 10000. Anisotropy of the porous medium is found to affect fluid flow, temperature distribution and heat transfer significantly. Higher permeability in the vertical direction enhances convective flow intensity and heat transfer inside the annulus. Average Nusselt number on the inner hot wall increases with increase in Rayleigh number or radius ratio, while it decreases with increase in aspect ratio or permeability ratio. The influence of thermal anisotropy is not so significant as that of hydrodynamic anisotropy. The numerically predicted temperature distribution at various locations inside the annulus shows reasonable agreement with experimental results available for isotropic porous medium. Based on a parametric study, correlation for heat transfer is presented in terms of Rayleigh number, aspect ratio, radius ratio, and permeability ratio.