A new β-galactosidase-producing bacterium KGP, isolated from the Bay of Bengal, was identified as Paracoccus marcusii through morphology, biochemistry and 16S rRNA sequencing. This study is the first report on the production of β-galactosidase from P. marcusii. The medium components for the high yield of β-galactosidase were optimised using response surface methodology (RSM). A set of 17 experiments consisting of three independent variables, viz. yeast extract, galactose and MgSO4, was employed. A second-order polynomial equation was used for the analysis of the response, and the optimum β-galactosidase yield was achieved using 12.5 g/L yeast extract, 12.5 g/L galactose and 12.5 mmol/L MgSO4. The predicted quadratic model was inferred to be significant from the F-value, P value and the lack of fit value. Optimisation of the media components resulted in a ninefold increase (560 Miller units) in β-galactosidase production. Furthermore, the hydrolysis and transgalactosylation efficiency of the crude β-galactosidase was assessed and the results showed that the lactose was successfully hydrolysed and transgalactosylated at an optimum temperature of 40 °C and 50 °C, respectively. Considering the overall yield and productivity, P. marcusii can be considered a candidate for the industrial production of β-galactosidase. This study provides an essential basis for the future production and use of the alkali-tolerant β-galactosidase from P. marcusii KGP. © 2020, Institute of Microbiology, Academy of Sciences of the Czech Republic, v.v.i.