Catalyzes the hydrolysis of lactose to its constituent monosaccharides glucose and galactose. Hydrolysis of terminal non-reducing beta-D-galactose residues in beta-D-galactosides. Optimum pH is 6.0 for both lactose and ONPG hydrolysis, but lactose hydrolysis activity is more sensitive to changes in pH than ONPG hydrolysis activity. Optimum temperature is 37 degrees Celsius for both lactose and ONPG hydrolysis. Retains 16.5% of activity for ONPG hydrolysis and 11.2% of activity for lactose hydrolysis at 4 degrees Celsius. Stable at or below 25 degrees Celsius, but loses 50% of its activity after 1 hour at 37 degrees Celsius and is inactivated after only 40 minutes at 45 degrees Celsius. Can hydrolyze 73% of lactose in milk in 30 hours at 10 degrees Celsius. Has potential for lactose removal from dairy products at refrigerated temperatures. Belongs to the glycosyl hydrolase 42 family.