The transgalactosylation activity of Kluyveromyces lactis cells was studied in detail. Cells were permeabilized with ethanol and further lyophilized to facilitate the transit of substrates and products. The resulting biocatalyst was assayed for the synthesis of galacto-oligosaccharides (GOS) and compared with two soluble β-galactosidases from K. lactis (Lactozym 3000 L HP G and Maxilact LGX 5000). Using 400 g/L lactose, the maximum GOS yield, measured by HPAEC-PAD analysis, was 177 g/L (44% w/w of total carbohydrates). The major products synthesized were the disaccharides 6-galactobiose [Gal-β(1→6)-Gal] and allolactose [Gal-β(1→6)-Glc], as well as the trisaccharide 6-galactosyl-lactose [Gal-β(1→6)-Gal-β(1→4)-Glc], which was characterized by MS and 2D NMR. Structural characterization of another synthesized disaccharide, Gal-β(1→3)-Glc, was carried out. GOS yield obtained with soluble β-galactosidases was slightly lower (160 g/L for Lactozym 3000 L HP G and 154 g/L for Maxilact LGX 5000); however, the typical profile with a maximum GOS concentration followed by partial hydrolysis of the newly formed oligosaccharides was not observed with the soluble enzymes. Results were correlated with the higher stability of β-galactosidase when permeabilized whole cells were used.