Prebiotic galactosyl oligosaccharides (GOS) are produced from lactose by the enzyme β-galactosidase. It is widely reported that the highest GOS levels are achieved when the initial lactose concentration is as high as possible; however, little evidence has been presented to explain this phenomenon. Using a system composed of the commercial β-galactosidase derived from Bacillus circulans known as Biolacta FN5, lactose and sucrose, the relative contribution of water activity, and substrate availability were assessed. Oligosaccharide levels did not appear to be affected by changes in water activity between 1.0 and 0.77 at a constant lactose concentration. The maximum oligosaccharide concentration increased at higher initial concentrations of lactose and sucrose, while initial reaction rates for transfer increased but remained constant for hydrolysis. This suggests that the high oligosaccharide levels achieved at the raised initial saccharide concentration are due to increases in reactions that form oligosaccharides rather than decreases in concurrent reactions, which degrade oligosaccharides. There were different effects from changing the initial concentration of lactose compared to sucrose, suggesting that the ability of lactose to act as a donor saccharide may be more important for increasing maximum oligosaccharide concentrations than the combined ability of both saccharides to act as galactosyl acceptors.