Summary Yoghurt is a unique fermented dairy product, consumed throughout the world and the trend of consumption is increasing due to its unique health benefits. Yoghurt mix is often supplemented with MSNF (milk solids-non-fat), it may contain as much as 5.7% unhydrolysed lactose. Lactose can be hydrolysed with an enzyme lactase. Deficiency of lactase in lactose-intolerant persons leads to gastrointestinal disorders; such consumers may find it difficult to consume lactose unhydrolysed yoghurt. The production of lactose hydrolysed yoghurt by pre-hydrolysing of lactose in the yoghurt mix by enzymatic hydrolysis of lactose was studied using standard materials and methods. Among the different levels of enzyme examined (0.12 to 0.56% of yoghurt mix with increment of 0.04% at eachlevel), 0.16, 0.32 and 0.52% were found suitable to hydrolyse 50, 70 and 90% lactose in the yoghurt mix, respectively. Lactose hydrolysed yoghurt (LHY) prepared from 70% followed by 50% lactose hydrolysedmix (LHM) had significantly higher scores for body and texture, flavour and overall acceptability thancontrol (P<0.05). However, 90% LHY secured significantly lower scores for sensory scores (P<0.05) and lactose hydrolysis in mix had no effect on colour and appearance of yoghurt at all levels of hydrolysis. Lactose hydrolysis reduced the setting time by 30-45 min over control (210 min) (P<0.05). The curd strength was checked by measuring penetration (mm/5sec) using a cone penetrometer. The yoghurt from 50, 70 and 90% LHM had shown significantly increased penetration of 280, 325 and 395 mm/5sec as compared to control (195 mm/5sec) and the amount of whey separation increased as the degree of lactose hydrolysis increased (P<0.05).