A genomic DNA library screen yielded the nucleotide sequence of a 12 kb fragment containing a gene (2067 bp) coding a thermostable beta-galactosidase from Alicyclobacillus acidocaldarius ATCC 27009. The beta-galactosidase gene was expressed in Pichia pastoris, and up to 90 mg recombinant beta-galactosidase/l accumulated in shake flask cultures. Using o-nitrophenyl-beta-D-galactopyranoside as a substrate, the optimum pH and temperature of the purified recombinant beta-galactosidase were 5.8-6.0 and 70 degrees C, respectively. The enzyme retained 90% of its activity when heated at 70 degrees C for 30 min. Approximately 48% of lactose in milk was hydrolyzed following treatment with the recombinant enzyme over 60 min at 65 degrees C.