Isomaltulose is a structural isomer of sucrose commercially used in food industries. In this work, recombinant Escherichia coli producing sucrose isomerase (SIase) was used to convert sucrose into isomaltulose. To develop an economical industrial medium, untreated cane molasses (10.63 g l⁻¹), yeast extract (25.93 g l⁻¹), and corn steep liquor (10.45 g l⁻¹) were used as main culture compositions for SIase production. The relatively high SIase activity (14.50 ± 0.11 U mg DCW⁻¹) was obtained by the recombinant cells. To the best of our knowledge, this is the first investigation on SIase production by engineered E. coli using untreated cane molasses. The recombinant E. coli cells expressing the SIase gene were immobilized in calcium alginate gel in order to improve the efficiency of recycling. The immobilization was most effective with 2 % (w/v) sodium alginate and 3 % (w/v) calcium chloride. The optimal initial biomass for immobilization was 20 % (w/v, wet wt.), with a hardening time of 8 h for cell immobilization. The immobilized E. coli cells exhibited good stability for 30 batches with the productivity of 0.45 g isomaltulose g pellet⁻¹ h⁻¹. A continuous isomaltulose formation process using a column reactor remained stable for 40 days with 83 ± 2 % isomaltulose yield, which would be beneficial for economical production of isomaltulose.