Galacto-oligosaccharides (GOS), also known as Bifidus growth factor, are prebiotic functional food ingredients that have been shown to beneficially affect the host well being by selectively stimulating the growth and/or activity of health-promoting bacterial species in the colon. GOS can be produced from whey permeate or lactose by an enzymatic transgalactosiylation reaction using ß-galactosidase. The goal of this project was to develop a two-step immobilized enzyme reactor for GOS production. First, lactase was immobilized in cotton cloth treated with polyethyleneimine (PEI) , a strong positive charges polymer. After the immobilization, glutaraldehyde was used for crosslinking, working with a high enzyme loading. Using an initial lactose concentration of 400g/l, products containing 40% GOS (at 60% lactose conversion) and 25% GOS (at 45% lactose conversion) were obtained by using lactase from Bacillus circulans and Aspergillus oryzae respectively. In the overall design the unreacted lactose was recycled back to the first enzyme reactor to further improve GOS yield.