| Avodah Zarah 35b, 39b|| Yoreh De'ah 115:1|
Chalav Yisrael (Hebrew: חלב ישראל), common Ashkenazi pronunciation cholov Yisroel, is a halachic term which refers to all dairy products, including cheese and non-fat dry milk powder, which derive from milk that has been milked under the supervision of an observant Jew.
According to Jewish law (halacha), milk is kosher only if it comes from a kosher species of animal (such as cows and sheep), while milk from a non-kosher species (such as horses and camels) is non-kosher.
Although it would have been exceedingly unlikely for farmers to mix the milk of non-kosher species with milk of kosher species, since it was conceivable to have a farm selling a mixture of kosher and non-kosher milk, the rabbinic authorities in talmudic times issued an injunction against the drinking of any milk whose milking was not done by, or under the supervision of, an observant Jew – such milk is alternately referred to in halachic literature as either chalav akum or chalav nochri. This prohibition was codified in the Shulchan Aruch which unequivocally forbids consumption of any milk not milked under Jewish supervision.
The first chalav Yisrael dairy farm on the East Coast of the United States, and possibly in the entire United States, was started by Isaac Balsam in 1903, and remained in business until 1955.
Chalav Yisrael Wikipedia
All dairy products made in the USA and countries with government regulations on milk, even when bearing a kosher symbol, are likely to be "chalav stam". Chalav stam is a classification literally translating to "plain milk," which is given to milk produced in a country where government regulations make it reasonable to assume that milk is 100% what it is labeled as (i.e. anything labeled as "milk" is 100% cows milk, goat's milk must be 100% goats milk and labeled as such, etc.). Because the supervising bodies in the United States and countries where chalav stam is acceptable impose penalties and fines on milk producers found to be in violation of this requirement, Rabbi Moshe Feinstein ruled that we can logically infer that milk produced there has not been mixed with non-kosher milk and therefore does not receive the designation of "chalav akum." Kosher certifications in such countries usually mark "chalav yisrael" in either English or Hebrew next to their kosher symbol. In Israel, kosher certifiers don’t usually mark “chalav yisrael” since it is the standard there—in fact, kosher dairy products in Israel that are not chalav Yisrael need to be marked as such.
There are also Kabbalistic reasons for being strict concerning chalav Yisrael due to spiritual ramifications relating to the concept that drinking non-chalav Yisrael leads to "timtum ha-lev", a spiritual deadening of the heart.
"A chassid once came to the Alter Rebbe (Rabbi Shneur Zalman of Liadi, author of Tanya) lamenting the fact that his son-in-law was subject to periods when he would doubt his faith. The Alter Rebbe responded that the son-in-law had unwittingly consumed milk which was milked by a non-Jew, with no Jew in attendance. Though he was unaware of this fact, and though the prohibition against such milk is only of Rabbinic origin, this had so strong an effect upon him that it caused him to doubt his faith." - Chapter 8 of Lessons in Tanya with additions and explanations by Rabbi Menachem Mendel Schneerson assisted by Rabbi Yosef Wineberg .