β-Galactosidase (EC 3.2.1.23), widely distributed in animals, plants and microorganisms, plays an important role in biological regulations of carbohydrate metabolism. A potent β-galactosidase inhibitor named galactostatin was produced by Streptomyces lydicus strain PA-5726 isolated from a soil sample in Nagasaki Prefecture, Japan. This study describes the isolation, characterization, and inhibitory activity of galactostatin. The strain was cultured in a medium containing glycerol, meat extract, Polypeptone, and minerals at 28°C for 5~6 days, with maximum inhibitory activity reaching ca. 3,200 IU/ml. Galactostatin was isolated from the culture filtrate through acid adjustment (pH 4.5), 1.5% active carbon treatment, and sequential ion exchange chromatography (Dowex-1X8 (OH⁻), Dowex 50WX8 (H⁺), Amberlite IRA-47 (OH⁻)), followed by concentration, crystallization as a bisulfite adduct, and conversion to the free compound. The overall yield was about 46%, with 2,030 mg obtained from 8 liters of culture filtrate. Purified galactostatin is a white amorphous powder with molecular formula C₆H₁₃NO₅·H₂O, melting point 94~98°C, [α]ᴰ²⁶ +85.6° (c 1.0, H₂O), soluble in water, methanol, acetic acid, pyridine, and dimethyl sulfoxide, slightly soluble in ethanol and 2-propanol, and insoluble in most other organic solvents. Structural analysis via mass spectrometry, infrared spectroscopy, and ¹H NMR revealed it to be 5-amino-5-deoxy-D-galactopyranose, belonging to the piperidinose sugar group. Galactostatin showed 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.