Lactose is a common natural disaccharide composed of galactose and glucose molecules. It is mainly found in the whey, the by-product of cheese and casein industries. As the supply of lactose far exceeds demand, a lot of lactose was discarded as the waste every year, which not only leads to resource waste, but also causes environmental pollution. Therefore, the deep processing of lactose as the feedstock has become a hot research topic. The lactose-derived sugar alcohols, including lactitol, sorbitol, and galactitol, have shown great potential applications not only in food manufacture, but also in pharmaceutical, cosmetic, and material fields. In this paper, we focus on the property, physiological effect, production, and application of the lactose-derived sugar alcohols.