A new β-galactosidase inhibitor was found with a newly developed rapid and practical screening method for β-galactosidase inhibitors. Several strains of Actinomycetes that produced β-galactosidase inhibitors were isolated from soil samples using this method, and Streptomyces lydicus PA-5726 was found to produce a high concentration of new inhibitor in the culture medium. Improvement of the medium led to 20~25-fold augmentation (45 to 900~1,100 μg/ml) of the production. This new inhibitor, which was named galactostatin, was isolated by adsorption on Dowex-50W×8 (H+), crystallization from the bisulfite adduct, development on Dowex-2×8 (OH−) and precipitation with EtOH. Galactostatin displayed strong inhibitory activity toward several β-galactosidases in acidic and neutral media but low acute toxicity in mice (LD50 1016 mg/kg, i.v.). β-Galactosidase [β-D-galactoside galactohydrolase; EC 3.2.1.23], which is widely distributed in animals, plants and microorganisms, catalyzes two reactions: hydrolysis of β-galactosidic bonds with the release of galactose from oligosaccharides, polysaccharides, glycolipids and glycoproteins, and a transfer reaction from substrates to acceptor substances. These reactions are considered to play important roles in the biological regulation of carbohydrate metabolism. Several β-galactosidase inhibitors have recently been isolated from the culture broth of microorganisms. We also searched for β-galactosidase inhibitors in the culture broth of Actinomycetes isolated from soil samples and found a β-galactosidase inhibitor in the culture filtrate of Streptomyces sp. strain PA-5726. Subsequent work involving isolation and physicochemical characterization showed this inhibitor to be a new compound. We named it galactostatin, and describe in this paper the screening method used, and the fermentation, isolation and inhibitory activity of the inhibitor.