The thermotolerant yeast strain, Khyveromyces marxianus lMB3 was shown to be capable of growth and ethanol production on lactose containing media at 45°C. On media containing 4% (w/v) lactose, ethanol production increased to 6.Og/l within 50h and this represented 29% of theoreti+ yield. During growth on lactose containing media the organism was shown to produce a cell-associated ~galactosidase and no significant enzyme could be detected in the extracellular culhue f%rate. Addition of P-galactosidase, released from Khyveromyces murxianzis IMB3 cells, to active fermentations, resulted in increasing ethanol production to 53% of theoretical yield at 45°C.