Catalyzes the hydrolysis of lactose to its constituent monosaccharides glucose and galactose. Possesses a low level of transgalactosylation activity for the production of galacto-oligosaccharides (GOS) from lactose. Hydrolysis of terminal non-reducing beta-D-galactose residues in beta-D-galactosides. Inhibited by hydrolysis end products D-galactose and D-glucose. The hydrolysis of o-nitrophenyl-beta-D-galactopyranoside (ONPG) is slightly activated by monovalent ions, Na(+) and K(+). Concentrations of these ions in the range of 1-100 mM exert the stimulating effects. The presence of 1 mM Mn(2+) together with the presence of 10 mM Na(+) slightly stimulates the activity, while presence of 10 mM Mn(2+) inhibits the activity by about 40%. Optimum pH is 6.5 for both lactose and ONPG hydrolysis. Stable at pH 5-8 and most stable at 6.5, retaining more than 90% and 80% of its activity when incubated at pH 6.5 and 37 degrees Celsius for 5 days and 1 month, respectively. Optimum temperature of the activity is 50 degrees Celsius when using both lactose and ONPG as substrates under 10 minutes assay conditions. Stable over a wide range of temperatures (4-42 degrees Celsius), and when kept at these temperatures up to 1 month. Most stable at 37 degrees Celsius, retaining 90% of its activity after 1 month at this temperature. Half-life time of activity of approximately 7 days, 5 hours, and 30 minutes at 55, 60 and 65 degrees Celsius, respectively. Approximately 45% of lactose is hydrolyzed within the first 3 hours of the reaction at 60 degrees Celsius, while about 20% is cleaved at 37 degrees Celsius when employing initial lactose concentration of 50 g/l at pH 6.5. For initial lactose concentrations of 200 and 50 g/l and at temperature of 60 degrees Celsius, the maximum GOS yields are approximately 12% and 7%, respectively. At the initial lactose concentration of 200 g/l, the GOS yields obtained at 60 degrees Celsius are significantly higher than at 37 degrees Celsius, with approximately 12% and 5% of total sugars, respectively. Homodimer. Has potential for partial lactose removal in food products and improving the quality of dairy products by increasing their solubility and sweetness. Belongs to the glycosyl hydrolase 42 family.