Re-engineering of chemical materials at the nanoscale level that employ modification and improvement in their physical and chemical properties has been constantly pursued for application in biomedical and biotechnology industries. Moreover, immobilization of catalysts on these bio/chemically modified nanomaterials improved the performance of enzymes in a plethora of industrial uses. Hence, in this study, cerium oxide nanoparticles (CNPs) were synthesized and their morphology was investigated by TEM and UV-spectra. They were modified by carboxylation and glutaraldehyde to achieve highly efficient surface functionalized nanomatrices for immobilizing Aspergillus oryzae β-galactosidase for producing lactose-free products in dairy industries. Enzyme activity for soluble and immobilized enzyme was observed in different pH and temperature ranges, and on galactose mediated competitive inhibition offered by the substrate. It was observed that all the enzyme preparations exhibited temperature-optima at 50 °C and pH-optima at pH 4.5, respectively. Michaelis-Menten K m (mmole/L) values were 2.40, 5.88, 6.02 and 6.11 for soluble β-galactosidase, and enzyme immobilized on CNPs, carboxylated CNPs and glutaraldehyde modified CNPs, respectively. However, V max (mmole/L/min) was found to be 518, 507, 495 and 480 for these enzyme preparations under identical conditions. Immobilized enzyme demonstrated excellent reusability even after seven repeat uses. The bioconversion rates of lactose from solution in continuous batch reactors revealed the remarkable catalytic efficiency of β-galactosidase immobilized on glutaraldehyde modified CNPs in comparison to other enzyme preparations.