The thermostable beta-glucosidase from Pyrococcus furiosus has been shown to produce tri- and tetrasaccharides with lactose as a substrate (0.73-1.44 mol/kg) at elevated temperatures (75-95 degrees C). The enzyme has a broad pH optimum (5.0-7.0), and was inhibited more by glucose than by galactose. An increase in the initial lactose concentrations led to a proportional increase of the ratio between the initial oligosaccharide production rate and the initial lactose conversion rate. Because of inhibition by Maillard components, the lowest temperature studied (75 degrees C) is the best for oligosaccharide synthesis. The oligosaccharide yield obtained with this thermostable enzyme is independent of the initial lactose concentration and temperature and a factor 1.4 higher than reported for mesophilic enzymes.