The present study was carried to evaluate the effect of size reduction using ultrasonication on functionality and bioactivity of whey protein isolate (WPI). The results showed that ultrasonication was able to reduce particle size of whey from 1.025 µm to 549 nm. The polydispersity index and zeta potential increased subsequently upon ultrasonication from 0.22 to 0.48 and -12 to -21 mV confirming narrow range of particle size distribution and enhanced colloidal stability. The SEM of non-treated whey showed dense spherical structure whereas upon ultrasonication the structure of protein granules changes to polygon. Size of granule was reduced and distortion in shape was observed. The ultrasonicated and native whey were characterized for functional properties viz. foaming, emulsifying, water and oil absorption capabilities. The solubility and hydrophobicity of whey before and after ultrasonication were determined. The WPI had higher hydrophobicity than ultrasonicated WPI which could be owed to the protein unfolding due to acoustic cavitation effect of ultrasonication. Water and oil absorption capacity of WPI were also affected by ultrasonication, water absorption capacity was decreased whereas oil absorption capacity was increased upon ultrasonication. The nutraceutical properties of WPI viz. antioxidant, antimicrobial, antihypertensive, antilipidemic, and antiproliferative activities were also found to increase significantly upon ultrasonication. Overall the study suggests that nanoreduction is a novel approach to improve the applicability of WPI in the emerging functional food industry as the ultra-sonication was profusely able to tailor the functionality and physiological implications of WPI.