Extracellular lactase (beta-d-galactosidase, EC 18.104.22.168) was prepared as an ethanol precipitate from a culture of Fusarium moniliforme grown on whey. The enzyme functioned optimally at pH 3.8 to 5.0 and at 50 to 60 degrees C on both o-nitrophenyl-beta-d-galactopyranoside (ONPG) and lactose. The activation energy of the enzymic hydrolysis of ONPG and lactose in the range of 20 to 55 degrees C was 8,500 and 7,200 cal (ca. 3.57 x 10 and 3.02 x 10 J)/mol, respectively. The K(m) values were 4.4 and 12.4 mM for ONPG and lactose, respectively. At optimum pH, the enzyme lost half of its activity when it was heated at 50 degrees C for 6 h; at the same pH, the loss was only 5% when the enzyme was heated at 37 degrees C for 6 h. At optimum conditions, 50% of the lactose in whey was hydrolyzed by 10 U of this enzyme in 50 h.