The enzyme β-galactosidase (β-gal) has extensively used for improvement of lactose intolerance condition. Present study, was designed to assess the potential of β-gal enzyme produced by Lactobacillus fermentum, a kefir isolate, as a biocatalyst for the manufacture of prebiotic galactooligosaccharides (GOS) from lactose. The efficiency of L. fermentum to produce β-gal of 4,254 u/ml was determined by permeabilizing the cells with solvents such as sodium dodecyl sulfate (SDS) and chloroform. Different parameters contributing β-gal production including reaction time, temperature, pH, carbohydrates, and substrate concentration on L. fermentum were studied and optimum β-gal activity was found to be 6,232.13 u/ml. It was observed that different experimental parameters for pH (7.0), temperature (35°C), and carbohydrates (galactose) were statistically significant (p<0.05). L. fermentum was found to produce GOS by transgalactosylation catalysed by β-gal during lactose hydrolysis which yielded di, tri, and tetra oligosaccharides, confirmed by TLC and HPLC. The culture showed β-gal activity, suggesting biotechnological applications and a promising organism for industrial β-gal production.