To determine the reduction of lactose in buffalo’s milk after inoculation with Aspergillus oryzae, 100 ml of whole buffalo’s milk was inoculated with 10 ml spore suspension (1.12 x 107 spores/ml) (T2) and another 100 ml milk was added with 10 ml supernatant from previously A. oryzae-inoculated milk (T3). These were then incubated for 4 hr at 30°C together with the non-inoculated milk (T1). Significant differences in mean lactose contents and reducing sugar contents (P≤0.05) were observed. The lactose content and reducing sugar content decreased in T2 by 29.71% and 14.20%, respectively. The lactose content of whole buffalo’s milk in T3 decreased by 48.77% while the reducing sugars increased by 17.51%. The reduction in lactose and reducing sugars in T2 milk was due to the utilization of lactose as carbon source by the fungal spores for lactase production. The reduction in lactose content and increment in reducing sugars in T3 milk were due to enzymatic action of extracellular lactase (β-galactosidase) produced by the Aspergillus oryzae. The results indicate that lactase produced by A. oryzae can breakdown lactose in buffalo’s milk and A. oryzae is a potential source of extracellular enzyme for the production of lactose-free milk.