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In the present study, the microbial source for potent lactase producers was explored to supplement the lactase intolerant individuals. Dairy effluent was screened for lactase producing bacteria by conventional microbiological methods. Among the positive isolates, one isolate VUVD001 was found to be a strong producer of lactase enzyme and this strain identified by 16S rDNA analysis. The lactase producing bacterium is identified as Bacillus subtilis by biochemical and 16S rDNA analysis. The VUVD001 strain found to survive in a temperature range of 20–55 °C, pH range of 5–8 and a salt concentration up to 8%. Further, the partially purified enzyme preparation was tested by zymogram analysis for activity testing using x-gal and the enzyme activity of cell free supernatant was estimated to be 15.10 U/ml at 37 °C, 4% NaCl and pH of 7.0. Our finding reports a new isolate Bacillus subtilis VUVD001 strain which can be used as potential strain for commercial production of lactase. [ABSTRACT FROM AUTHOR]