A thermotolerant yeast strain, Kluyveromyces marxianus IMB3, has previously been shown to be capable of ethanol production following growth on lactose-containing media at 45 degrees C. Here, we demonstrate that the organism is capable of producing inducible beta-galactosidase activity in the presence of lactose. The majority of the activity appears to be cell associated. Enzyme, isolated following disruption of the cells, has been partially characterized and shown to have a K-m of 5 mM for the substrate o-nitrophenyl-beta-D-galactoside, whereas that for lactose was found to be 40 mM. The activity was shown to have an optimal operating temperature of 50 degrees C, although the half-life of the enzyme was shown to be <5 min at that temperature. The half-life of the isolated enzyme at 45 degrees C, the optimal fermenting temperature of the yeast, was shown to be 15 min. The enzyme was stable at 30 degrees C for at least 8 h. The optimum pH was 7.5. When we analyzed the result using nondenaturing polyacrylamide gradient gel electrophoresis together with zymogram staining with methylumbelliferyl-beta-D-galactoside as substrate, two distinct forms of activity were observed following prolonged incubation with substrate. The results suggest that although this yeast is capable of ethanol production at 45 degrees C, thermotolerance is not reflected in the enzyme activity associated with assimilation of lactose.