The production of lactose hydrolyzed dairy products presents both challenges and opportunities in the food industry. This chapter explores the complexities involved in processing lactose-free or low lactose dairy products, focusing on enzymatic hydrolysis, product preparation methods, and issues related to sensory quality, drying, and storage. Challenges during preparation techniques, including batch, aseptic, and membrane processes, are discussed, along with sensory and quality considerations. Challenges during drying and storage, particularly regarding the impact of lactose hydrolysis on the drying process and chemical alterations during storage such as maillard reactions, are also addressed. Despite these challenges, opportunities abound in the lactose hydrolyzed dairy product market, driven by increasing consumer demand for health-oriented foods and the potential for product diversification. Lactose-free UHT milk enriched with prebiotic galactooligosaccharides and lactose hydrolyzed milk powder represent promising avenues for innovation and market expansion.