The biotechnology field has witnessed rapid advancements, leading to the development of numerous proteins and peptides (PPs) for disease management. The production and isolation of bioactive milk peptides (BAPs) involve enzymatic hydrolysis and fermentation, followed by purification through various techniques such as ultrafiltration and chromatography. The nutraceutical potential of bioactive milk peptides has gained significant attention in nutritional research, as these peptides may regulate blood sugar levels, mitigate oxidative stress, improve cardiovascular health, gut health, bone health, and immune responses, and exhibit anticancer properties. However, to enhance BAP bioavailability, the encapsulation method can be used to offer protection against protease degradation and controlled release. This article provides insights into the composition, types, production, isolation, bioavailability, and health benefits of BAPs.