Bioactive peptides have attracted the interest of researchers as a health promoting functional food. Yet there is limited work done in this area due to lack of advanced technologies, enriched products and molecular approaches. There is an urgent need to focus on developing novel facilities including advanced proteomics approaches, recombinant enzyme technologies and microbial fermentation, to study the various impacts of bioactive peptides on expression of genes and also to optimize the nutritional and health effects of these compounds. Consequently allergenicity, toxicity and stability of its biological functions during gastrointestinal digestion should be tested in formulation of products incorporated with bioactive peptides. Moreover, preliminary beneficial effects of milk derived bioactive peptides on target diseases should be considered carefully before it can be formulated as chemotherapeutical agents or may try to use them directly in their viable condition. Hence separation and identification of these peptides and their pharmaco-dynamic parameters are necessary to transfer their potent functional properties into food and clinical applications. Scientific researches and industrial development in the direction of searching novel bioactive peptides promise to formulate several drugs and health beneficial functional foods.