Melt pelletization of lactose 450 M was carried out in an 8-l high shear mixer using PEG 3000 as the meltable binder. The pore size and size distribution of the melt pellets were determined using mercury intrusion porosimetry. The pore size distribution of melt pellets was found to be bimodal. With a higher binder concentration, post-melt impeller speed or longer post-melt processing time, the fraction of large pores in the agglomerates was reduced but the tendency of the agglomerates to develop sub-micron pores increased. The extent of formation of large pores was dependent on the interplay between the inter-particle distance of lactose particles and the contraction property of molten binder. High process temperature was associated with a greater amount of water loss from the melt agglomerates. The water vapor liberated from the lactose particles, was trapped in the molten PEG during the pelletization process. The formation of sub-micron pores was a result of escape of this water vapor on solidification of the molten PEG as well as agglomerate densification. The quantity of sub-micron pores produced was found to be related to the level of water loss. The melt agglomeration gave rise to large agglomerates when long post-melt processing time, high post-melt impeller speed or binder concentration was used.