Galactooligosaccharlde (GOS) is a kind of functional oligosaccharides that can be used as a food ingredient and a cosmetic additive. In this paper, characteristics of GOS synthesis by cellulase, using lactose as a substrate, were investigated. Penicillium funiculosum cellulose was found to be the most efficient for GOS production among six cellulose tested. The optimum pH and temperature for GOS production were 5.0 and $50^{circ}C$, respectively. There was an optimum ratio of lactose concentration to enzyme loading; the value was 10 (w/w). The reaction pattern of P. funiculosum cellulase is consistent with that of microbial ${eta}$-galactosidase which shows transgalactosylation activity. Amounts of GOS produced from 20% (w/v) lactose after 6 h incubation at $50^{circ}C$, were 23% (w/w) based on total saccharide in the reaction medium. The GOS % increased with initial lactose concentration in the range of 5 to 20%. The products mainly consisted of a trisaccharide and tetrasaccharide from HPLC and TLC analysis. Among enzymes involved in transgalactosylation reaction, high molecular weight fractions over 50,000 Da, presumably ${eta}$-glucosldase, were considered to be responsible for GOS production. Using this cellulose, a direct synthesis of galactosyl g1ucoside including GOS could be readily achieved with lactose as a galactosyl donor.