Lactulose production from lactose and fructose was investigated with several commercial beta-galactosidases. The enzyme from Kluyveromyces lactis exhibited the highest lactulose productivity among the beta-galactosidases tested. The reaction conditions for lactulose production were optimized using cells that had been permeabilized by treatment with 50% (v/v) ethanol: cell concentration, 10.4 g l(-1); concentration of substrates, 40% (w/v) lactose and 20% (w/v) fructose; temperature, 60(degrees)C; pH 7.0. Under these conditions, the permeabilized cells produced approximately 20 g l(-1) lactulose in 3 h with a lactulose productivity of 6.8 g l(-1) h(-1). These results represent 1.3- and 2.1-fold increases in lactulose concentration and productivity compared with untreated washed cells. This is the first reported trial of enzymatic synthesis of lactulose using permeabilized yeast cells.