An exceptionally large beta -galactosidase, BIF3, with a subunit molecular mass of 188 kDa (1,752 amino acid residues) was recently isolated from Bifidobacterium bifidum DSM20215 [Moller et al. (2001) Appl Environ Microbiol 67:2276-2283]. The BIF3 polypeptide comprises a signal peptide followed by an N-terminal beta -galactosidase region and a C-terminal galactose-binding motif. We have investigated the functional importance of the C-terminal part of the BIF3 sequence by deletion mutagenesis and expression of truncated enzyme variants in Escherichia coli. Deletion of approximately 580 amino acid residues from the C-terminal end converted the enzyme from a normal, hydrolytic beta -galactosidase into a highly efficient, transgalactosylating enzyme. Quantitative analysis showed that the truncated beta -galactosidase utilised approximately 90% of the reacted lactose for the production of galacto-oligosaccharides, while hydrolysis constituted a 10% side reaction. This 9:1 ratio of transgalactosylation to hydrolysis was maintained at lactose concentrations ranging from 10% to 40%, implying that the truncated beta -galactosidase behaved as a "true" transgalactosylase even at low lactose concentrations.