Paneer whey (PW), a significant by-product of the Indian dairy industry, contains nearly 50% of the total milk solids. Despite its nutritional value, a substantial portion of PW remains underutilized and is often discarded, leading to both nutrient loss and environmental pollution due to its high organic load. Leveraging its rich nutrient profile, PW can be transformed into value-added products, such as galactooligosaccharides (GOS), which are recognized prebiotics. The objective of this study was to develop a GOS-rich paneer whey powder and assess its storage stability. Paneer whey was concentrated to 40% lactose content and hydrolyzed using commercial β-galactosidase enzymes in a sequential process at 40°C for 4 hours. The resulting GOS-rich hydrolyzed concentrated paneer whey (HCPW) syrup was characterized and stored in polyethylene terephthalate (PET) bottles at 7 ± 2°C for 180 days. Initially, the HCPW contained 24.34% GOS (based on initial lactose content) and 6.94 µM/L hydroxymethylfurfural (HMF), with no significant changes observed during storage. For spray-drying, the Taguchi method was used to optimize processing conditions. Moisture content, insolubility index, drying yield, and encapsulation efficiency were selected as response variables. The optimized GOS-rich whey powder exhibited an encapsulation efficiency of 55.43% and excellent solubility and dispersibility (93.03%). To evaluate storage stability, the spray-dried GOS-rich paneer whey powder was packed in aluminium-laminated pouches and stored at 30 ± 2°C for 90 days. Microbiological parameters remained within permissible limits throughout the storage period. Although moisture content increased significantly, it remained below 5%. The browning index rose from 5.59 to 8.07, and HMF content increased from 45.41 to 57.18 µM/L, indicating the progression of Maillard browning. However, the encapsulation efficiency and GOS content of the powder remained stable during storage.