Beta-galactosidase, commonly named lactase, is one of the most important enzymes used in dairy processing; it catalyzes the hydrolysis of lactose to its constituent monosaccharides glucose and galactose. Here, a thermostable beta-galactosidase gene bgaB from Bacillus stearothermophilus was cloned and expressed in B. subtilis WB600. The recombinant enzyme was purified by a combination of heat treatment, ammonium sulfate fractionation, ion exchange, and gel filtration chromatography techniques. The purified beta-galactosidase appeared as a single protein band in sodium dodecyl sulfate-PAGE gel with a molecular mass of approximately 70 kDa. Its isoelectric point, determined by polyacryl-amide gel isoelectric focusing, was close to 5.1. The optimum temperature and pH for this beta-galactosidase activity were 70 degrees C and pH 7.0, respectively. Kinetics of thermal inactivation and half-life times for this thermostable enzyme at 65 and 70 degrees C were 50 and 9 h, respectively, and the K(m) and V(max) values were 2.96 mM and 6.62 micromol/min per mg. Metal cations and EDTA could not activate this thermostable enzyme, and some divalent metal ions, namely, Fe(2+), Zn(2+), Cu(2+), Pb(2+), and Sn(2+), inhibited its activity. Thiol reagents had no effect on the enzyme activity, and sulfhydryl group blocking reagents inactivated the enzyme. This enzyme possessed a high level of transgalactosylation activity in hydrolysis of lactose in milk. The results suggest that this recombinant thermostable enzyme may be suitable for both the hydrolysis of lactose and the production of galactooligosaccharides in milk processing.