Liquid-phase lactose oxidation was investigated over supported Pd/C and Pd-carbon nanofibre catalysts, which were characterized by several methods. A complex relationship between catalyst activity and catalyst acidity was established, i.e. optimum catalyst acidity resulted in the highest activity in lactose oxidation. In-situ catalyst potential measurements during lactose oxidation gave information about the extent of accumulation of oxygen on the metal surface. These results could be correlated with catalyst deactivation, which was extensive over the most acidic catalysts at low reaction temperatures. Selectivity for the desired product, lactobionic acid, was a maximum of approximately 83% at 93% conversion. The main side-product was lactulose formed via isomerisation of lactose. Lower selectivity toward lactobionic acid was obtained when the rate of oxidation of lactose was low.