β-Galactosidase, a glycoside hydrolase enzyme, also possesses glycosyl transferase activity and can glycosylate various aglycones, including tyrosol, a phenylethanoid with antioxidant and health-promoting effects. This study examines the effect of lactose, tyrosol and deep eutectic solvents (DESs) as co-solvents on the stability and activity of β-galactosidase during the enzymatic synthesis of tyrosol β-d-galactoside (TG). The enzyme's thermal stability was assessed using nanoDSF and circular dichroism spectroscopy, while the enzyme's activity and specificity toward different glycosyl acceptors were investigated using the initial rate method. The effects of tyrosol and DESs on tyrosol galactoside synthesis over a 6 h period were also studied. Lactose and glycerol were found to stabilize the enzyme. Among the DESs tested, those containing betaine showed the highest stabilizing effect. The presence of DESs not only affected the overall enzyme activity but also changed the enzyme specificity, most frequently in favor of lactose hydrolysis. Components of DESs containing alcohol groups (polyols) also acted as transglycosylation acceptors. However, both glycerol and tyrosol were found to inhibit overall enzyme activity and TG synthesis. Overall, our findings provide new and valuable insights into the influence of reaction conditions on the stability and specificity of β-galactosidase.