The bioactivities of peptides encrypted in major milk proteins are latent until released and activated by enzymatic proteolysis, e.g. during gastrointestinal digestion or food processing. The proteolytic system of lactic acid bacteria can contribute to the liberation of bioactive peptides. In vitro, the purified cell wall proteinase of Lactococcus lactis was shown to liberate oligopeptides from beta- and alpha-caseins which contain amino acid sequences present in casomorphins, casokinines, and immunopeptides. The further degradation of these peptides by endopeptidases and exopeptidases of lactic acid bacteria could lead to the liberation of bioactive peptides in fermented milk products. However, the sequences of practically all known biologically active peptides can also be cleaved by peptidases from lactic acid bacteria. Activated peptides are potential modulators of various regulatory processes in the body: Opioid peptides are opioid receptor ligands which can modulate absorption processes in the intestinal tract, angiotensin-I-converting enzyme (ACE)-inhibitory peptides are hemodynamic regulators and exert an antihypertensive effect, immunomodulating casein peptides stimulate the activities of cells of the immune system, antimicrobial peptides kill sensitive microorganisms, antithrombotic peptides inhibit aggregation of platelets and caseinophosphopeptides may function as carriers for different minerals, especially calcium. Bioactive peptides can interact with target sites at the luminal side of the intestinal tract. Furthermore, they can be absorbed and then reach peripheral organs. Food-derived bioactive peptides are claimed to be health enhancing components which can be used for functional food and pharmaceutical preparations.