A beta-galactosidase, catalyzing lactose hydrolysis and galactooligosaccharide (GalOS) synthesis from lactose, was extracted from the yeast, Bullera singularis KCTC 7534. The crude enzyme had a high transgalactosylation activity resulting in the oligosaccharide conversion of over 34% using pure lactose and cheese whey permeate as substrates. The enzyme was purified by two chromatographic steps giving 96-fold purification with a yield of 16%. The molecular weight of the purified enzyme ( specific activity of 56 U mg(-1)) was approx. 53 000 Da. The hydrolytic activity was the highest at pH 5 and 50degreesC, and was stable to 45degreesC for 2 h. Enzyme activity was inhibited by 10 mM Ag3+ and 10 mM SDS. The K-m for lactose hydrolysis was 0.58 M and the maximum reaction velocity (V-max) was 4 mM min(-1). GalOS, including tri- and tetra-saccharides were produced with a conversion yield of 50%, corresponding to 90 g GalOS l(-1) from 180 g lactose l(-1) by the purified enzyme.