The cytoplasmic -beta galactosidase/beta-glucosidase from hyperthermophilic archaeon Sulfolobus shibatae has been characterized with regard to its use in lactose hydrolysis. Cell extract was purified 16-fold to a specific activity 29.5 U/mg using ammonium sulfate precipitation, ion-exchange chromatography, and gel filtration. Isolated enzyme exhibited optimum activity at pH 5.5 and 98C and had a half-life of 7 h in acetate buffer (pH 5.5) at 90C. Cu2+, Hg2+ and Zn2+ strongly inhibited the enzyme, whereas catalytic properties of other investigated cations were barely influenced. Glucose and galactose were predominantly produced from lactose. However, at the substrate concentration of 0.15, M small amount of lactose was converted into transgalactosylation products.