The present study demonstrates synthesis, characterization and surface functionalization of silver nanoparticles (AgNPs) via glutaraldehyde for high yield immobilization of Aspergillus oryzae beta-galactosidase. Soluble beta-galactosidase (S beta G), enzyme adsorbed on unmodified AgNPs (U beta G) and surface modified AgNPs (M beta G) showed same pH-optima at pH 4.5. However, it was observed that M beta G exhibited enhanced pH stability toward acidic and alkaline sides, and increased temperature resistance as compared to S beta G and U beta G. Michaelis constant, K-m was increased nearly three-folds for M beta G while V-max for soluble and M beta G was 0.515 mM/min and 0.495 mM/min, respectively. Furthermore, M beta G showed greater resistance to product inhibition mediated by galactose as compared to it soluble counterpart and exhibited excellent catalytic activity even after its fourth successive reuse. The remarkable bioconversion rates of lactose from milk in batch reactors further revealed an attractive catalytic efficiency of beta-galactosidase adsorbed on surface functionalized AgNPs thereby promoting its use in the production of lactose free dairy products. Crown Copyright (C) 2012 Published by Elsevier Ltd. All rights reserved.