During lactose conversion at 70 degrees C, when catalyzed by beta-glycosidases from the archea Sulfolobus solfataricus (Ss beta Gly) and Pyrococcus furiosus (CelB), galactosyl transfer to accepters other than water competes efficiently with complete hydrolysis of substrate. This process leads to transient formation of a range of new products, mainly disaccharides and trisaccharides, and shows a marked dependence on initial substrate concentration and lactose conversion. Oligosaccharides have been analyzed quantitatively by using capillary electrophoresis and high performance anion-exchange chromatography. At 270 g/L initial lactose, they accumulate at a maximum concentration of 86 g/L at 80% lactose conversion. With both enzymes, the molar ratio of trisaccharides to disaccharides is maximal at an early stage of reaction and decreases directly proportional to increasing substrate conversion. Overall, CelB produces about 6% more hydrolysis byproducts than Ss beta Gly. However, the product spectrum of Ss beta Gly is richer in trisaccharides, and this agrees with results obtained from the steady-state kinetics analyses of galactosyl transfer catalyzed by Ss beta Gly and CelB. The major transgalactosylation products of Ss beta Gly and CelB have been identified. They are beta-D-Galp-(1-->3)-Glc and beta-D-Galp-(1-->6)-Glc, and beta-D-Galp(1-->3)-lactose and beta-D-Galp(1-->6)-lactose, and their formation and degradation have been shown to be dependent upon lactose conversion. Both enzymes accumulate beta(1-->6)-linked glycosides, particularly allolactose, at a late stage of reaction. Because a high oligosaccharide concentration prevails until about 80% lactose conversion, thermostable beta-glycosidases are efficient for oligosaccharide production from lactose. Therefore, they prove to be stable and versatile catalysts for lactose utilization.