During the growth of Kluyveromyces marxianus var. marxianus ATCC 10022 on lactose, peaks of glucose, but not beta-galactosidase activity, were detected in culture medium. Harvested and washed whole cells produced glucose and galactose from lactose, or ortho-nitro-phenol from the chromogenic substrate ortho-nitro-phenyl-beta-D-galactopyranoside (ONPG), indicating that beta-galactosidase is physically associated with cells. ONPG hydrolysis by whole cells presented a monophasic kinetics (Km 36.6 mM) in lactose exponential growth phase cells, but a biphasic kinetics (Km 0.2 and 36.6 mM) in stationary growth phase cells. Permeabilization with digitonin or disruption of cells from both growth phases led to monosite ONPG hydrolysis (Km 2.2 to 2.5 mM), indicating that beta-galactosidase is not located in the periplasm. In addition, the energy inhibitors fluoride or arsenate, as well as the uncoupler carbonyl cyanide m-chlorophenylhydrazone (CCCP) prevented ONPG hydrolysis by whole cells. These findings indicate that energy coupled transmembrane transport is the rate-limiting step for intracellular ONPG cleavage. The taxonomic and physiologic implications of the exclusive intracellular location of beta-galactosidase of K. marxianus var. marxianus ATCC 10022 are discussed.