Isomaltulose is an ideal functional sweetener and has been approved as a safe sucrose substitute. It is produced mainly through sucrose isomerization catalyzed by sucrose isomerase. Here, to produce food-grade isomaltulose and improve its yield, the sucrose isomerase gene from Pantoea dispersa UQ68J was overexpressed in the nonpathogenic yeast Yarrowia lipolytica. When the engineered strain, S47, was fermented on 600 g/L sucrose in a 10L bioreactor, a maximum isomaltulose concentration of 572.1 g/L was achieved. Sucrose isomerase activity was 7.43 U/mL, and yield reached 0.96 g/g. Moreover, monosaccharide byproducts were simultaneously transformed into intracellular lipids, thus reducing the production of undesirable compounds and resulting in high isomaltulose purity (97.8%) in the final broth. In summary, the bioprocess employed in this study provides an efficient alternative strategy for isomaltulose production.