The present investigation was undertaken to evaluate the performance of β-galactosidase in the hydrolysis of lactose during the preparation of an innovative whey-based beverage and to assess the physicochemical, sensory, microbiological, and storage characteristics of the developed product. Sweet whey obtained during paneer manufacture was subjected to enzymatic hydrolysis using food-grade β-galactosidase at different concentrations (0.05, 0.10, 0.15, and 0.20%, w/v) and incubation periods (1, 2, 3, and 4 h) at 37°C. The degree of lactose hydrolysis, reducing sugar content, sweetness index, and sensory acceptability were evaluated to determine optimum processing conditions. Maximum lactose hydrolysis (91.84±1.12%) was achieved with 0.15% enzyme concentration after 3 h of incubation. The optimized whey beverage contained 0.48% residual lactose, 5.86% total sugars, 0.72% protein, and exhibited significantly (P<0.05) higher sweetness and overall acceptability than the control. The product remained microbiologically safe and organoleptically acceptable for 15 days under refrigerated storage (4±1°C). The study demonstrated that β-galactosidase effectively improves the nutritional quality, digestibility, and consumer acceptability of wheybased beverages. Keywords: β-Galactosidase, whey beverage, lactose hydrolysis, functional beverage, lactose intolerance, dairy by-products, value addition