Lactozym™ is a commercially available preparation of β-galactosidase from Kluyveromyces fragilis. It has valid generally recognized as safe (GRAS) status for whey hydrolysis and production of low lactose milk. Immobilized β-galactosidase from K. fragilis has been less studied. In this work, Lactozym™ was immobilized on cellulose beads via epichlorohydrin coupling chemistry. The optimized preparation was characterized in terms of its kinetic parameters. The fluidized bed hydrolyzed whey lactose (>90% conversion) in 5 h as compared to 48 h taken by the same enzyme in continuous batch mode. The immobilized enzyme could be reused three times without any change in the performance of the fluidized bed reactor. The fluidized bed could also hydrolyze milk lactose up to 60% within 5 h. The above data show that this enzyme from a GRAS status source can also be used to develop a process for lactose hydrolysis for whey utilization as well as production of low lactose milk.