Background: Previous observational studies have indicated a protective effect of drinking milk on asthma and allergy. In Mendelian Randomization, one or more genetic variants are used as unbiased markers of exposure to examine causal effects. We examined the causal effect of milk intake on hay fever, asthma, forced expiratory volume in one second (FEV1) and forced vital capacity (FVC) by using the lactase rs4988235 genotype associated with milk intake. Methods: We performed a Mendelian Randomization study including 363,961 participants from the UK Biobank. Results: Observational analyses showed that self-reported milk-drinkers vs. non-milk drinkers had an increased risk of hay fever: odds ratio (OR) = 1.36 (95% CI 1.32, 1.40, p < 0.001), asthma: OR = 1.33 (95% CI 1.38, 1.29, p < 0.001), yet a higher FEV1: β = 0.022 (SE = 0.004, p < 0.001) and FVC: β = 0.026 (SE = 0.005, p < 0.001). In contrast, genetically determined milk-drinking vs. not drinking milk was associated with a lower risk of hay fever: OR = 0.791 (95% CI 0.636, 0.982, p = 0.033), and asthma: OR = 0.587 (95% CI 0.442, 0.779, p = 0.001), and lower FEV1: β = − 0.154 (standard error, SE = 0.034, p < 0.001) liter, and FVC: β = − 0.223 (SE = 0.034, p < 0.001) liter in univariable MR analyses. These results were supported by multivariable Mendelian randomization analyses although not statistically significant. Conclusions: As opposed to observational results, genetic association findings indicate that drinking milk has a protective effect on hay fever and asthma but may also have a negative effect on lung function. The results should be confirmed in other studies before any recommendations can be made.