Dietary proteins are known to carry a wide range of nutritional, functional and biological properties. Nutritionally, the proteins are a source of energy and amino acids, which are essential for growth and maintenance. Functionally, the proteins contribute to the physicochemical and sensory properties of various protein-rich foods. Furthermore, many dietary proteins possess specific biological properties which make these components potential ingredients of functional or health-promoting foods. Many of these properties are attributed to physiologically active peptides encrypted in protein molecules. Particularly rich sources of such peptides are milk and egg, but they are also found in meat of various kinds as well as many plants. These peptides are inactive within the sequence of parent protein and can be released during gastrointestinal digestion or food processing. Depending on the amino acid sequence, these peptides may exert a number of different activities in vivo, affecting, e.g., the cardiovascular, endocrine, immune and nervous systems in addition to nutrient utilization. There is increasing commercial interest in the production of bioactive peptides from various sources. Industrial-scale production of such peptides is, however, hampered by the lack of suitable technologies. Bioactive peptides can also be produced from milk proteins through fermentation of milk, by starters employed in the manufacture of fermented milks or cheese. In particular, antihypertensive peptides have been identified in fermented milk, whey and ripened cheese. A few of these peptides have been commercialised in the form of fermented milks. There is a need to develop technologies which retain or even enhance the activity of bioactive peptides in food systems. Also, it is essential to study the optimum utilization of such peptides during passage through the gastrointestinal tract.