A gene encoding beta-galactosidase from Bacillus circulans which had hydrolysis specificity for the beta1-3 linkage was expressed in Escherichia coli. The beta-galactosidase was purified from crude cell lysates of E. coli by column chromatographies on Resource Q and Sephacryl S-200 HR. The enzyme released galactose with high selectivity from oligosaccharides which had terminal beta1-3 linked galactose residues. However it did not hydrolyse beta1-4 linked galactooligosaccharides. Moreover, Galbeta1-3GlcNAc, Galbeta1-3GalNAc, and their p-nitrophenyl glycosides were regioselectively synthesized in 10-46% yield by the transglycosylation reaction using this enzyme.