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How do you dissolve yeast in milk?

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Your recipe should indicate where and how to add the yeast, but yeast does not dissolve well in milk (if at all). Yeast forms into large clumps when mixed directly with milk and will take much longer to activate. I made this mistake the first time I tried to substitute milk for water when making bread.

The usual way of adding yeast to such a recipe is to fully dissolve the yeast in 1/4 cup of warm water (about 110 degrees Fahrenheit). If the water is not warm enough, it won't activate the yeast and if it's too warm, it can kill the yeast. One of my colleagues proofs the yeast in the usual way (1/4 cup warm water, 1 tsp sugar, 1 tsp yeast), then adds the rest of the yeast to the water, mixes the dry ingredients with the milk for the recipe, then adds the water-yeast mixture to that. He claims that it works perfectly.

Of course, if you use 1/4 cup of water to dissolve your yeast, subtract 1/4 cup of milk from the recipe unless otherwise indicated. And also make sure you're using the proper yeast for whatever it is you are baking.
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