Lactobacilli have several attributes that provide health benefits to the host. The aim of this study was to screen indigenous lactobacilli from human gut and fermented foods for such attributes as production of beta- and alpha-galactosidase and also their ability to reduce serum cholesterol. Lactobacilli were cultured on MRS broth and beta-galactosidase activity was determined using o-nitrophenyl-beta-D-galactopyranoside (ONPG) as a substrate. Three isolates Lactobacillus fermentum GPI-3 and L. fermentum GPI-6 and Lactobacillus salivarius GPI-1(S) showed better beta-galactosidase activity than the standard strains Lactobacillus rhamnosus GG (LGG) and Lactobacillus plantarum ATCC 8014. The isolates showed variability in assimilating cholesterol during growth. Several isolates showed excellent cholesterol-lowering ability compared to standard strains LGG and L. plantarum ATCC 8014. Isolate L. rhamnosus SCB being the highest acid producer (pH 4.38) also showed the highest cholesterol reduction compared to other strains including standard strains. The ability of these isolates to produce alpha-galactosidase was also studied and the maximum alpha-galactosidase activity was found in isolate L. salivarius GPI-1(S) followed by L. fermentum FA-5 and Lactobacillus helveticus FA-7. This study therefore reports Lactobacillus isolates that have superior probiotic properties when compared to the standard strains; hence, they could be considered as potential probiotic strains, which can provide health benefits to the Indian population.