β-Galactosidase (EC 3.2.1.23), widely distributed in animals, plants, and microorganisms and playing an important role in biological regulations of carbohydrate metabolism, has several inhibitors recently isolated from the cultured filtrates of microorganisms. Strain PA-5726, isolated from a soil sample collected in Nagasaki Prefecture, Japan, was identified as Streptomyces lydicus and produces a potent β-galactosidase inhibitor named galactostatin. This study describes the isolation, characterization, and inhibitory activity of galactostatin. The inhibitor was produced by shaking culture of strain PA-5726 in a medium containing glycerol 4.0%, meat extract 1.5%, Polypeptone 1.5%, and minerals (pH 7.0) at 28°C for 5~6 days, with maximum inhibitory activity reaching ca. 3,200 IU/ml at harvest. For isolation, the culture filtrate was adjusted to pH 4.5 with HCl, treated with 1.5% active carbon, passed through columns of Dowex-1X8 (OH⁻), Dowex 50WX8 (H⁺) (eluted with 0.5n HCl), and Amberlite IRA-47 (OH⁻) (desorbed with distilled water). The active fraction was concentrated, mixed with 6% sulfurous acid solution and 2-fold volume of ethanol at 4°C to form crystals of galactostatin bisulfite adduct, which was converted to the free compound via Dowex-2X8 (OH⁻) column. The overall yield was about 46%, with 2,030 mg galactostatin obtained from 8 liters of culture filtrate. Galactostatin is a white amorphous powder with mp 94~98°C, [α]D²⁶ + 85.6° (c 1.0, H₂O), and molecular formula C₆H₁₃NO₅·H₂O. It is soluble in polar solvents (water, methanol, etc.) and insoluble in most non-polar organic solvents, giving positive color reactions with NH₄-silver nitrate and weakly positive with ninhydrin. Structural analyses via mass spectrum (parent ion peak at m/z 161, M-18), IR (hydroxyl and imino groups at 3360, 2900, 1650 cm⁻¹), and ¹H NMR (anomeric protons of α at δ 4.77 and β at δ 4.00) confirmed it as 5-amino-5-deoxy-D-galactopyranose existing as a mixture of α and β anomer forms. Galactostatin shows strong inhibitory activity against β-galactosidases from various sources (bovine liver, mouse liver, rat liver, Charonia lampas, Jack beans, Escherichia coli, Saccharomyces fragilis, Aspergillus oryzae) over a wide pH range, and differs in chemical nature from previously reported β-galactosidase inhibitors.