The ability of ultrasound waves to alter the properties of milk may provide opportunities to improve or develop new dairy foods yet scaling-up to continuous systems has been challenging. In this study, raw milk (3% fat) was processed through an innovative continuous, low-frequency, high-intensity sonication unit (16/20 kHz, 1.36 kW/pass) at different inlet temperatures (42 and 54°C), flow rates (0.15, 30, and 0.45 L/min), and passes (up to 7 passes to obtain ultrasound exposures of 14 to 18 min) to determine the processing effects on fat droplet size, coagulation properties, microstructure of milk and chymosin-set gels, and bacterial counts. Particle size analysis and confocal microscopy showed that largest fat droplets (2.26 ± 0.13 μm) found in raw milk were selectively reduced in size with a concomitant increase in the number of submicron droplets (0.37 ± 0.06 μm), which occurred sooner when exposed to shorter bursts of ultrasonication (0.45 L/min flow rates) at 54°C. Ultrasound processing with milk at 42°C resulted in faster gelling times and firmer curds at 30 min; however, extended processing at 54°C reduced curd firmness and lengthened coagulation time. This showed that ultrasonication altered protein-protein and protein-lipid interactions, thus the strength of the enzyme-set curds. Scanning electron microscopy revealed a denser curd matrix with less continuous and more irregular shaped and clustered strands, while transmission electron microscopy showed submicron lipid droplets embedded within the protein strands of the curd matrix. Processing at 54°C with flow rates of 0.30 and 0.45 L/min also reduced the total aerobic bacterial count by more than 1 log cfu/mL; and the number of psychrophiles below the limit of detection (10 cfu/mL). The findings show that this continuous ultrasound system, which is more conducive to commercial scale-up, will modify the physical and functional properties of milk under the parameters used in this study and may be a potential new tool for dairy food processing.