An in situ technique with X-ray diffraction analysis has been developed to study the crystallization of lactose in humid air. This technique was used in association with ex situ scanning electron microscopy to determine changes in phase composition and morphology during crystallization. Individual spherical particles of spray-dried lactose plasticize and coalesce upon absorption of moisture. Following an induction period, crystallization is rapid with the appearance of the anhydrous 5:3 phase containing both a and isomers of lactose, alpha-lactose monohydrate and beta-lactose, almost simultaneously. The 5:3 phase decomposed as the other two phases developed. After extended exposure to humid air, only alpha-lactose monohydrate and beta-lactose were observed. The predominant particle habit observed in the fully crystallized lactose is platelet. These observations are rationalized in terms of the restricted molecular diffusion in plasticized lactose preventing movement of the beta-lactose isomer toward developing alpha-lactose monohydrate crystals with the result that normal solution phase inhibition of growth of the (0 (1) over bar1) face leading the tomahawk shaped crystal lactose does not occur. The restricted diffusional conditions also favor the formation of the mixed isomer 5:3 phase, resulting in the entrapment of both isomers during crystallization.