In the dairy industry different types of prebiotics, such galacto-oligosaccharide, lactulose, lactosucrose, tagatose, lactitol, lactobiono-and glucono-δ-lactone are synthesized through different chemical and biochemical reactions (hydrolysis, transgalactosylation, isomerization, fructosyl-transfer, reduction, and oxidation) as well as microbial fermentation processes using raw whey or isolated lactose as feedstock. Lactose-derived prebiotics have several functional and nutritional values. The biochemical activities of lactose-based prebiotics are expressed in the presence of probiotics (lactic acid bacteria, yeasts, Bacillus spp.). Galacto-oligosaccharide and lactosucrose reduce the risk of bowel disorder (diarrhea), infl ammatory bowel disease (ulcerative colitis and crohn's disease), and colon cancer. Galacto-oligosaccharide helps colonic absorption of minerals (iron, magnesium and calcium) and prevents osteoporosis. Lactulose, galacto-oligosaccharide, and lactitol promote laxative activity. Furthermore, lactulose may decrease the risk of hepatic encephalopathy. Prebiotics have low calorifi c value and glycemic index. Galactooligosaccharide and tagatose reduce the risks of hyperglycemia (Type 2 diabetes) and low density lipid (lipoprotein) accumulation in blood stream. Moreover, prebiotics improve immunomodulation, which reduces the risk of respiratory infection and allergies. This review describes unique biochemical mechanisms of several types of lactose-derived prebiotics.