a b s t r a c tA gene encoding a novel ␤-d-galactosidase from the psychrotolerant Antarctic bacterium Arthrobacter sp. 32cB was isolated, cloned and expressed in Escherichia coli. The active form of recombinant ␤-dgalactosidase consists of two subunits with a combined molecular weight of approximately 257 kDa. The enzyme's maximum activity towards o-nitrophenyl-␤-d-galactopyranoside was determined as occurring at 28 • C and pH 8.0. However, it exhibited 42% of maximum activity at 10 • C and was capable of hydrolyzing both lactose and o-nitrophenyl-␤-d-galactopyranoside at that temperature, with K m values of 1.52 and 16.56 mM, and k cat values 30.55 and 31.84 s −1 , respectively. Two units of the enzyme hydrolyzed 90% of the lactose in 1 mL of milk at 10 • C in 24 h. The transglycosylation activity of Arthrobacter sp. 32cB ␤-d-galactosidase was also examined. It synthesized galactooligosaccharides in a temperature range from 10 to 30 • C. Moreover, it catalyzed the synthesis of heterooligosaccharides such as lactulose, galactosyl-xylose and galactosyl-arabinose, alkyl glycosides, and glycosylated salicin from lactose and the appropriate acceptor at 30 • C. The properties of Arthrobacter sp. 32cB ␤-d-galactosidase make it a candidate for use in the industrial removal of lactose from milk and a promising tool for the glycosylation of various acceptors, especially those which are thermosensitive.