The application of reverse micellar micro-bioreactor systems for enzymatic conversion with continuous recovery of water-soluble products was demonstrated, based on the production of galactose by micelles containing beta-galactosidase (beta-gal). The beta-gal was firmly encapsulated in AOT (bis(2-ethylhexyl)sodium sulfosuccinate)/lecithin mixed micelles. The addition of lecithin to the AOT reverse micelles stabilized the micellar interface, and the leakage of the encapsulated beta-gal to the bulk aqueous phase was therefore negligible, while substrate and product were free to transfer and partition owing to their low molecular weights. The stability of the solubilized beta-gal was also increased in the AOT/lecithin mixed micelles as compared to the conventional AOT micelles. A considerably higher activity was observed in the present systems than in the bulk buffer solution. Enzymatic conversion and product recovery was carried out in a continuous operation mode by use of centrifugal partition chromatography (CPC), employing the reverse micellar solution with encapsulated beta-gal as the stationary phase and the substrate aqueous solution as the mobile phase. Use of the CPC contactor eliminated any mass transfer limitation on the substrate and the product, and galactose was continuously recovered in the effluent. The recovery of galactose continued for a period of 5 h with more than a 85% conversion at the optimum operating condition. This reverse micellar micro-bioreactor system was thus found to be very effective for the continuous production and recovery of hydrophilic products.