Cheese whey is a by-product of cheese-manufacturing industries, and the utilization of whey is a challenging problem either to use it or dispose it, because only few microorganisms can metabolize the whey lactose. Enzymatic hydrolysis of whey lactose to glucose and galactose by β-galactosidase is the approach for biotechnological application. Kluyveromyces marxianus cells were permeabilized with non-toxic, biodegradable, anionic detergent N-lauroyl sarcosine (N-LS) for the enzyme activity. The permeabilization process parameters (N-LS concentration, solvent volume, temperature and incubation time) were optimized. The maximum β-galactosidase activity of 1,220 IU/g dry weight was obtained using permeabilized cells under optimized conditions. Moreover, viability of the permeabilized cells was also evaluated, which showed that cells were alive; however, viability was reduced by two log cycles. The permeabilized cells were evaluated for whey lactose hydrolysis. The maximum lactose hydrolysis of 91% was observed with 600 mg (dry cell weight/100 mL) in whey powder (5% w/v) solution at 180-min incubation, pH 6.5 and 30 °C. Further, the hydrolyzed whey was evaluated for amelioration of growth of non-lactose-consuming yeast Saccharomyces cerevisiae. S. cerevisiae was able to grow in hydrolyzed whey simultaneously with K. marxianus. The study confirmed that N-LS could be used to permeabilize K. marxianus cells to make available the enzyme activity.