Yoghurt powder has a long shelf life; however, its physical properties before and after reconstitution are poor. Inulin and stabilizers were used for improvement of physical properties of both yoghurt powder and its reconstituted form. Inulin and stabilizers including kappa-carrageenan, high methoxylated pectin, or carboxymethyl cellulose were added to yoghurt and the mixtures were freeze-dried. Dispersibility, hygroscopicity, and the degree of caking of the powders and rheological properties and serum separation of the reconstituted powders were measured. Inulin enhanced dispersibility, and reduced the degree of caking while stabilizers caused further improvement in the dispersibility and a significant decrease in hygroscopicity of yoghurt powder. Inulin yielded the highest consistency while stabilizers were effective in reducing or inhibiting serum separation in reconstituted yoghurt powders. The use of both inulin and kappa-carrageenan is recommended to improve the physical properties of both yoghurt powder and the yoghurt obtained from it. Practical applications Yoghurt powder has a long shelf life compared to yoghurt which extends its usage potential. Yoghurt powder is used as a food ingredient and a carrier for probiotics. There is a need for improvement of physical properties of reconstituted yoghurt powder as the drying process has an adverse effect on its structure. This study reports that using inulin and stabilizers can enhance rehydration ability, stability, and physical properties after reconstitution of yoghurt powder.