In situ galacto-oligosaccharide (GOS) synthesis in milk using β-galactosidases is an effective method for developing prebiotic dairy products. However, the low lactose concentration in milk (∼4.6%, w/w) reduces the GOS yield. In this study, a modified β-galactosidase from Bacillus circulans (mBgaD-D) with enhanced transglycosylation activity at low lactose concentration was developed through directed evolution and saturation mutagenesis. The GOS yield by mBgaD-D increased from 22.8% (wild type) to 30.8% in 50 g/L lactose (phosphate buffer). P mgut was a strong sorbitol-inducible promoter from Bacillus subtilis. The expression of mBgaD-D in B. subtilis, coupled with the P mgut promoter, resulted in a 6.4-fold increase (compared to the P 43 promoter) in extracellular enzyme activity. Additionally, adding whey powder to boost the initial lactose concentration further improved the GOS yield, which reached 43% under the optimized conditions. Combining mBgaD-D and whey powder enhanced milk sweetness, producing no sugar-added, GOS-enriched yogurt (GOSY). The GOS content in GOSY was 4.1/100 g, providing an appropriate level of sweetness and yielding a yogurt that is elastic as well as firm. GOSY also increased the population of Bif idobacterium spp. during a 24 h in vitro fecal fermentation. Thus, fortifying yogurt with mBgaD-D and whey powder can enhance its technological properties and health benefits.