Thermal inactivation of immobilized lactase has been studied in the presence of substrate and products. Modulation factors of thermal inactivation have been determined for lactose and galactose based on a two-stage series-type mechanism of inactivation. Galactose was a positive modulator of enzyme stability while the opposite occurred with lactose; the glucose effect was negligible. A model for packed-bed continuous reactor operation with chitin-immobilized lactase from Kluyveromyces marxianus var. marxianus was developed considering modulated thermal inactivation and appropriate kinetic expression for lactose hydrolysis. Experimental results were in good agreement with the model which was a far better representation of reactor performance than the conventional model not considering the effect of substrate and products on enzyme inactivation.