Background and Objective: Lactic acid is widely used in the food, chemical and pharmaceutical industries. The major problems associated with lactic acid production are substrate and end-product inhibition, and by-product formation. Membrane technology represents one of the most effective processes for lactic acid production. The aim of this work is to increase cell density and lactic acid productivity due to reduced inhibition effect of substrate and product in membrane bioreactor. Material and Methods: In this work, lactic acid was produced from lactose in membrane bioreactor. A laboratory scale membrane bioreactor was designed and fabricated. Five types of commercial membranes were tested at the same operating conditions (transmembrane pressure: 500 KPa and temperature: 25°C). The effects of initial lactose concentration and dilution rate on biomass growth, lactic acid production and substrate utilization were evaluated. Results and Conclusion: The high lactose retention of 79% v v-1 and low lactic acid retention of 22% v v-1 were obtained with NF1 membrane; therefore, this membrane was selected for membrane bioreactor. The maximal productivity of 17.1 g l-1 h-1 was obtained with the lactic acid concentration of 71.5 g l-1 at the dilution rate of 0.24 h−1. The maximum concentration of lactic acid was obtained at the dilution rate of 0.04 h−1. The inhibiting effect of lactic acid was not observed at high initial lactose concentration. The critical lactose concentration at which the cell growth severely hampered was 150 g l-1. This study proved that membrane bioreactor had great advantages such as elimination of substrate and product inhibition, high concentration of process substrate, high cell density, and high lactic acid productivity.