A new method for the immobilization of beta-galactosidase was developed which involved entrapment of the enzyme in cobalt alginate beads with a relative activity of 83%, the highest activity reported in the literature for beta-galactosidase immobilization. Enzyme leakage was avoided by treatment with glutaraldehyde solution (1%) following which the relative activity (83%) was stable. The effect of pH and temperature on enzyme activity and reusability were investigated. This method yielded high activity and good physico-chemical characteristics and the immobilized particles were used in a plug flow reactor. The effects of the residence time and substrate concentration on productivity were investigated. The effect of temperature on operating time was also studied. This method could potentially be applied to be a general system for immobilization of different enzymes which are not inactivated by cobalt salts.