Galacto-oligosaccharides (GOS) are classified as prebiotics due to their indigestible nature. GOS are regarded as resistant to salivary digestion and are not utilized by the mouth. Thus, they can be utilized as substitutes for low-cariogenic sugar. The structure of GOS mixtures is determined by the differentiation between the transferase reaction and hydrolysis. Transgalactosylation can be achieved intramolecularly when the glycosidic bond in lactose cleaves and reassembles itself on another glucose molecule. Microbes can be used as a source for the β-galactosidase enzyme or as agents to produce GOS units. Commercial β-galactosidase enzymes likewise do have a great potential for their use in GOS synthesis. These transgalactosyl reactions could find useful applications in dairy. Since 70% of the world's population cannot tolerate lactose, lactose utilization could only be enhanced through hydrolysis into its components, the monomer sugars of D-glucose and D-galactose. GOS can be produced industrially using whey or lactose as the substrate. Trisaccharide (β1-4 or β1-6 galactosyllactose) are generally the major products of this process. In comparison with lactose and other saccharide molecules, GOS has been shown to have low carcinogenicity, low calorific value, and low sweetness. This review focuses on GOS production, and the physicochemical characteristics, physiological effects, and applications of these prebiotics are summarized.