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The enzymatic transformation of the sugar moiety of the gypenosides provides a new way to obtain more pharmacologically active components. A gene encoding a family 1 glycosyl hydrolase from <i>Bifidobacterium dentium</i> was cloned and expressed in <i>Escherichia coli</i>. The recombinant enzyme was purified, and its molecular weight was approximately 44 kDa. The recombinant BdbglB exhibited an optimal activity at 35 °C and pH 5.4. The purified recombinant enzyme, exhibiting β-glucosidase activity, was used to produce gypenoside XVII (Gyp XVII) via highly selective and efficient hydrolysis of the outer glucose moiety linked to the C-3 position in ginsenoside Rb1 (G-Rb1). Under the optimal reaction conditions for large scale production of gypenoside XVII, 40 g ginsenoside Rb1 was transformed by using 45 g crude enzyme at pH 5.4 and 35 °C for 10 h with a molar yield of 100%. Furthermore, the anti-inflammatory effects of the product gypenoside XVII and its conversion precursor ginsenoside Rb1 were evaluated by using lipopolysaccharide (LPS)-induced murine RAW 264.7 macrophages and the xylene-induced acute inflammation model of mouse ear edema, respectively. Gypenoside XVII showed improved anti-inflammatory activity, which significantly inhibited the generation of TNF-α and IL-6 more effectively than its precursor ginsenoside Rb1. In addition, the swelling inhibition rate of gypenoside XVII was 80.55%, while the rate of its precursor was 40.47%, the results also indicated that gypenoside XVII had better anti-inflammatory activity than ginsenoside Rb1. Hence, this enzymatic method would be useful in the large-scale production of gypenoside XVII, which may become a new potent anti-inflammatory candidate drug.