A gene encoding a novel beta-D-galactosidase from the psychrotolerant Antarctic bacterium Arthrobacter sp. 32cB was isolated, cloned and expressed in Escherichia coli. The active form of recombinant beta-D-galactosidase consists of two subunits with a combined molecular weight of approximately 257 kDa. The enzyme's maximum activity towards o-nitrophenyl-beta-D-galactopyranoside was determined as occurring at 28 degrees C and pH 8.0. However, it exhibited 42% of maximum activity at 10 degrees C and was capable of hydrolyzing both lactose and o-nitrophenyl-beta-D-galactopyranoside at that temperature, with K-m, values of 1.52 and 16.56 mM, and k(cat) values 30.55 and 31.84 s(-1), respectively. Two units of the enzyme hydrolyzed 90% of the lactose in 1 mL of milk at 10 degrees C in 24 h. The transglycosylation activity of Arthrobacter sp. 32cB beta-D-galactosidase was also examined. It synthesized galactooligosaccharides in a temperature range from 10 to 30 degrees C. Moreover, it catalyzed the synthesis of heterooligosaccharides such as lactulose, galactosyl-xylose and galactosyl-arabinose, alkyl glycosides, and glycosylated salicin from lactose and the appropriate acceptor at 30 degrees C. The properties of Arthrobacter sp. 32cB beta-D-galactosidase make it a candidate for use in the industrial removal of lactose from milk and a promising tool for the glycosylation of various acceptors, especially those which are thermosensitive. (C) 2014 The Authors. Published by Elsevier Ltd. This is an open access article under the CC BY-NC-ND license.