Lactose is the main carbohydrate in the milk of most species. It is present in virtually all dry dairy ingredients, with levels ranging from <2% (e.g., caseinates, milk protein isolates) to 100% in lactose powders. The presence of lactose has a strong effect on ingredient processing and stability. Lactose can negatively influence powder properties and lead to undesirable effects, such as the stickiness of powder resulting in fouling during drying, or caking and related phenomena during storage. In addition, being a reducing carbohydrate, lactose can also participate in the Maillard reaction with free amino groups of proteins, peptides, and free AA. In this review, the influence of the presence (or absence) of lactose on physiochemical properties of dairy ingredients is reviewed, with particular emphasis on behavior during processing and storage. Particularly important features in this respect are whether lactose is in the (glassy) amorphous phase or in the crystalline phase, which is strongly affected by precrystallization conditions (e.g., in lactose, permeate, and whey powders) and by drying conditions. Furthermore, the moisture content and water activity of the ingredients are important parameters to consider, as they determine both mobility and reactivity, influencing Maillard reactions and concomitant browning, the crystallization of amorphous lactose during storage of dairy ingredients, glass transitions temperatures, and associated stickiness and caking phenomena. For the stickiness and caking, a crucial aspect to take into account is powder particle surface composition in relation to the bulk powder. Lactose is typically underrepresented at the powder surface, as a result of which deviations between observed lactose-induced caking and stickiness temperatures, and determined glass transition temperatures arise. By considering lactose as an integral part of ingredient composition along with all other compositional and environmental properties, lactose behavior in dairy ingredients can be understood, controlled, and optimized. Routes to achieve this are outlined in this review paper.