The in-frame fusion between two oligomeric enzymes, beta-galactosidase and galactose dehydrogenase, is described. The lacZ gene was fused to the 3' end of the galdh gene with a linker encoding only three amino acids. The purified artificial bifunctional enzyme displayed the enzymic activity of both gene products. The hybrid protein was found in two major forms, consisting of four and six subunits, but other forms could also be identified. The molecular weight of each subunit was determined to be 145,000 by sodium dodecyl sulfate-polyacrylamide gel electrophoresis. The bifunctional enzyme shows kinetic advantages over the identical native system in conversion of lactose to galactonolactone. A higher steady-state rate and a reduction of the transient time are observed. This phenomenon is especially pronounced at low initial substrate concentrations and when the pH is adjusted to a level at which the galactose dehydrogenase activity is much higher than that of the beta-galactosidase.