Strains of Saccharomyces cerevisiae transformed with a yeast multicopy expression vector carrying the cDNA for Aspergillus niger secretory β- galactosidase under the control of ADH1 promoter and terminator were studied for their fermentation properties on lactose (V. Kumar, S. Ramakrishnan, T. T. Teeri, J. K. C. Knowles, and B. S. Hartley, Biotechnology 10:82-85, 1992). Lactose was hydrolyzed extracellularly into glucose and galactose, and both sugars were utilized simultaneously. Diauxic growth patterns were not observed. However, a typical biphasic growth was observed on a mixture of glucose and galactose under aerobic and anaerobic conditions with transformants of a haploid S. cerevisiae strain, GRF167. Polyploid distiller's yeast (Mauri) transformants were selected simply on the basis of the cloned gene expression on X-Gal (5-bromo-4-chloro-3-indolyl-β-D- galactopyranoside) plates. Rapid and complete lactose hydrolysis and higher ethanol (0.31 g/g of sugar) and biomass (0.24 g/g of sugar) production were observed with distiller's yeast grown under aerobic conditions. A constant proportion (10%) of the population retained the plasmid throughout the fermentation period (48 h). Nearly theoretical yields of ethanol were obtained under anaerobic conditions on lactose, glucose, galactose, and whey permeate media. However, the rate and the amount of lactose hydrolysis were lower under anaerobic than aerobic conditions. All lactose-grown cells expressed partial galactokinase activity.