A novel beta-galactosidase of 120 kDa (BgaBM) from Bacillus megaterium 2-37-4-1 was purified, and its gene (bgaBM) was analyzed and expressed. It displayed wide acceptor specificity for transglycosylation with a series of acceptors, including pentose, hexose, hydroxyl, and alkyl alcohol using o-nitrophenyl-beta-d-galactoside (ONPG) as a donor. BgaBM preferentially hydrolyzed ONPG in all tested substrates and showed maximum activity at pH 7.5-8.0 and 55 A degrees C. It was stable at pH 6.0-9.0 below 40 A degrees C. The K (m) and V (max) values for ONPG and lactose were 9.5 mM, 16.6 mM/min and 12.6 mM, 54.4 mM/min, respectively. The nucleotide sequence of the bgaBM gene consists of an ORF of 3,105 bp corresponding to 118 kDa protein, which indicates that BgaBM is a modular enzyme in the glycosyl hydrolase family 2, including conserved sugar-binding domain, acid-base catalyst, and immunoglobulin-like beta-sandwich domain. The possible acid/base and nucleophile sites of BgaBM were estimated to be E481 and E547, respectively. Furthermore, expression of the bgaBM gene in Escherichia coli and purification of the recombinant enzyme were performed. The recombinant enzyme showed similar biochemical characteristics to natural enzyme.