The unique chemical, optical, and electrical characteristics of nanoparticles make their utilization highly successful in every field of biological sciences as compared to their bulk counterpart. These properties arise as a result of their miniature size, which provides them an excellent surface area-to-volume ratio, inner structure, and shape, and hence increases their surface characteristics. Therefore, this study was undertaken to engineer gold nanoparticles (AuNPs) for improving their catalytic activity and stability in biotechnological processes. The characterization of AuNPs was performed by XRD, UV spectra, and TEM. The synthesized AuNPs were surface-modified by polyvinyl alcohol (PVA) for binding the enzyme in excellent yield. The developed immobilized enzyme system (PVA-AuNPs-β-galactosidase) displayed pH optima at pH 7.0 and temperature optima at 40 °C. Moreover, the stability of PVA-AuNPs-β-galactosidase was significantly enhanced at wider pH and temperature ranges and at higher galactose concentrations, in contrast to the free enzyme. β-galactosidase bound to PVA-modified AuNPs exhibited greater operational activity, even after its sixth reuse. The developed nanosystem may prove useful in producing lactose-free dairy products for lactose-intolerant patients.