**Abstract**

Co-products from food processing are typically disposed or turned into low value animal feed. Proteinaceous co-products can be converted to bioactive peptides exerting health benefits, which can lead to development of nutraceuticals and functional foods. This is an effective means for valorization of these co-products. The release of encrypted peptides exhibits various bioactivities, including antihypertension, antioxidant, immunomodulatory activities among others, *in vitro*, and some activities have been demonstrated *in vivo*. Structure modification of bioactive peptides occurring under gastrointestinal digestion and cellular transport remains the important factor determining the health benefits of bioactive peptides. Understanding peptide transformation in gastrointestinal tract and in blood circulation before reaching the target organs would shed some lights on its bioavailability and subsequently ability to exert physiological impact. In this chapter, the potential health promoting properties of peptides encrypted in various sources of co-products will be reviewed based on evidence on *in vitro*, *in vivo* and clinical trial studies. Structural changes of bioactive peptides under physiological condition will also be discussed in relation to its bioactivities.

**Keywords:** bioactive peptide, transepithelial transport, bioavailability, peptide sequence
