Microbial alpha-galactosidases (AGals) are widely used in agriculture and food industries for degrading raffinose family oligosaccharides and synthesizing galactooligosaccharides (GOSs). While rational engineering of AGals is ongoing, limited understanding of substrate specificity and the determinants of hydrolysis and transglycosylation hinders progress. Here, we apply quantum mechanics/molecular mechanics (QM/MM) simulations to investigate the catalytic mechanism and substrate specificity of Saccharomyces cerevisiae glycoside hydrolase family 27 (GH27) AGal. The enzyme catalyzes hydrolysis via a Koshland double-displacement mechanism and cleaves linear galactomannans in an exo-mode. Free-energy calculations indicate glycosylation is the rate-determining step with a barrier (Delta G‡) of 17.8 kcalmol^-1, consistent with experimental data. A key 4-OHnucleophile interaction stabilizes the transition state, particularly for deglycosylation. Machine learning identified Trp188 and Phe235 at positive subsites as mutational hotspots. Six AGal variants were evaluated for in silico transglycosylation activity. Aromatic substitutions at Phe235 (F235Y and F235W) favored nucleophilic attack (NA) with sucrose, while W188A, W188R, and F235S showed low reaction barriers for lactose. The W188A variant showed improvement with a 10 kcalmol^-1 decrease in Delta G‡, a pronounced 0.3 Ų; shortening of NA distance, and an increased solvent exposure of similar to ∼500-600 Ų. These results highlight the potential of computer-aided subsite engineering to enhance AGal performance in GOS production.