Lactose intolerance is a serious global health problem. A lactose hydrolysis enzyme, thermostable β-galactosidase, BgaB (from Geobacillus stearothermophilus) has attracted the attention of industrial biologists because of its potential application in processing lactose-containing products. However, this enzyme experiences galactose product inhibition. Through homology modeling and molecular dynamics (MD) simulation, we have identified the galactose binding sites in the thermostable β-galactosidase BgaB (BgaB). The binding sites are formed from Glu303, Asn310, Trp311, His354, Arg109, Phe341, Try272, Asn147, Glu148, and H354; these residues are all important for enzyme catalysis. A ligand-receptor binding model has been proposed to guide site-directed BgaB mutagenesis experiments. Based upon the model and the MD simulations, we recommend mutating Arg109, Phe341, Trp311, Asn147, Asn310, Try272, and His354 to reduce galactose product inhibition. In vitro site-directed mutagenesis experiments confirmed our predictions. The success rate for mutagenesis was 66.7 %. The best BgaB mutant, F341T, can hydrolyze lactose completely, and is the most promising enzyme for use by the dairy industry. Thus, our study is a successful example of optimizing enzyme catalytic chemical reaction by computer-guided modifying the catalytic site of a wild-type enzyme.