All the major cow milk proteins in their native states are potential allergens in infants with milk allergy. Heat treatment can reduce the antigenicity of whey proteins considerably, but it has virtually no effect on the antigenicity of casein. Infants allergic to milk still react to heat-denatured whey proteins. Therefore heat denaturation alone cannot produce a formula with low allergenicity. Enzyme hydrolysis reduces the antigenicity and allergenicity of protein. Partial hydrolysis produces hydrolysate consisting mainly of large peptides, whereas extensive hydrolysis produces hydrolysate containing a mixture of large and small peptides and free amino acids. Enzyme hydrolysis often produces bitter peptides and destroys the physical functionality of protein. When hydrolysate formula is made, casein or whey protein hydrolysate is ultrafiltered to remove large residual peptides. Certain amino acids are fortified to provide a balanced amino acid profile. The final formulation must comply with the recommendations of the Codex Alimentarius Commission (FAO/WHO) and the U.S. Infant Formula Act to provide adequate infant nutrition. Protein hydrolysate-based formula can be improved by further reducing the residual allergenicity, increasing the small peptide content, and improving the taste.