Alginate lyase has been demonstrated as an efficient tool in the preparation of functional oligosaccharides (AOS) from alginate. The high viscosity resulting from the high concentration of alginate poses a limiting factor affecting enzymatic hydrolysis, particularly in the preparation of the fragments with low degrees of polymerization (DP). Herein, a PL7 family alginate lyase Algt from Microbulbifer thermotolerans DSM 19189 was developed and expressed in Pichia pastoris. The recombinant alginate lyase Algt1 was constructed by adopting the structural domain truncation strategy, and the enzymatic activity towards the alginate was improved from 53.9 U/mg to 212.86 U/mg compared to Algt. Algt1 was stable when incubated at 40 °C for 90 min, remaining with approximately 80.9% of initial activity. The analyses of thin-layer chromatography (TLC), fast protein liquid chromatography (FPLC), and electrospray ionization mass spectrometry (ESI-MS) demonstrated that the DP of the minimum identifiable substrate of Algt1 was five, and the main hydrolysis products were AOS with DP 1–4. Additionally, 1-L the enzymatic hydrolysis system demonstrated that Algt1 exhibited an effective degradation at alginate concentrations of up to 20%, with the resulting products of monosaccharides (14.02%), disaccharides (21.10%), trisaccharides (37.08%), and tetrasaccharides (27.80%). These superior properties of Algt1 make it possible to efficiently generate functional AOS with low DP in industrial processing.