The effect of oxygen transfer on the production of immobilized whole cell β-galactosidase has been evaluated. The encapsulated whole cell β-galactosidase was prepared by combining cell encapsulation and culture into one-step. Escherichia coli was encapsulated and cultured in the growth and production media to accumulate β-galactosidase in itself. Sunflower seed oil was coimmobilized to increase the oxygen transfer rate through the capsule membrane. The oxygen transfer rate increased 63 percent and the activity of β-galactosidase increased by 10 percent. The activity of encapsulated β-galactosidase obtained in the concentric air lift reactor was 86 percent higher than that in the shaking incubator. In the concentric air lift reactor, the accumulation of encapsulated whole cell β-galactosidase was primarily dependent on the capsule velocity. While the accumulation of specific β-galactosidase in the capsule increased with volumetric oxygen transfer coefficient, the cell biomass accumulated in the capsule decreased.