D-tagatose is a ketohexose that can be used as a novel functional sweetener in foods, beverages, and dietary supplements. This study was aimed at developing a high-yielding D-tagatose production process using alginate immobilized Lactobacillus fermentum CGMCC2921 cells. For the isomerization from D-galactose into D-tagatose, the immobilized cells showed optimum temperature and pH at 65 °C and 6.5, respectively. The alginate beads exhibited a good stability after glutaraldehyde treatment and retained 90% of the enzyme activity after eight cycles (192 h at 65 °C) of batch conversion. The addition of borate with a molar ratio of 1.0 to D-galactose led to a significant enhancement in the D-tagatose yield. Using commercial β-galactosidase and immobilized L. fermentum cells, D-tagatose was successfully obtained from lactose after a two-step biotransformation. The relatively high conversion rate and productivity from D-galactose to D-tagatose of 60% and 11.1 g l⁻¹ h⁻¹ were achieved in a packed-bed bioreactor. Moreover, lactobacilli have been approved as generally recognized as safe organisms, which makes this L. fermentum strain an attracting substitute for recombinant Escherichia coli cells among D-tagatose production progresses.