A new beta -galactosidase based biocatalyst consisting of whole Kluyveromyces lactis cells entrapped in calcium alginate beads has been developed. Formulative parameters and their effects on the enzymatic activity were studied by a 2(3) full factorial experimental design. Enzymatic activity showed a bimodal trend progressing with time and appeared to be influenced by the structure and dimension of the surrounding gel. Small particles became the choice for scale-up purposes. Remarkably, it was demonstrated that beta -galactosidase activity per unit of cell biomass was higher in alginate-immobilized than in free-growing cells in the same medium. Milk whey saccharification by the ethanol-permeabilized cells was studied in packed bed bioreactors. Permeabilization increased the lactose hydrolysis rate and prevented ethanol fermentation allowing 99.5% of milk whey lactose to be hydrolyzed at 30 degreesC for 30 h.