BACKGROUNDThe present study aimed to evaluate the anti‐hypertensive and anti‐diabetic activities from biologically active peptides produced by fermented sheep milk with Lacticaseibacillus paracasei M11 (MG027695), as well as to purify and characterize the angiotensin‐converting enzyme (ACE) inhibitory and anti‐diabetic peptides produced from fermented sheep milk.RESULTSAfter 48 h of fermentation at 37 °C, sheep milk demonstrated significant changes in anti‐diabetic effects and ACE‐I effects, with inhibition percentages observed for ACE inhibition (76.32%), α‐amylase (70.13%), α‐glucosidase (70.11%) and lipase inhibition (68.22%). The highest level of peptides (9.77 mg mL–1) was produced by optimizing the growth conditions, which included an inoculation rate of 2.5% and a 48 h of incubation period. The comparison of molecular weight distributions among protein fractions was conducted through sodium dodecyl‐sulfate polyacrylamide gel electrophoresis analysis, whereas spots were separated using 2D gel electrophoresis according to both the molecular weight and pH. Peptide characterization with ultra‐filtration membranes at 3 and 10 kDa allowed the study to assess molecular weight‐based separation. Nitric oxide generated by lipopolysaccharide and the secretion of pro‐inflammatory cytokines in RAW 264.7 immune cells were both inhibited by sheep milk fermented with M11. Fourier‐transform infrared spectroscopy was employed to assess changes in functional groups after fermentation, providing insights into the structural changes occurring during fermentation.CONCLUSIONThe present study demonstrates that fermentation with L. paracasei (M11) led to significant changes in fermented sheep milk, enhancing its bioactive properties, notably in terms of ACE inhibition and anti‐diabetic activities, and the generation of peptides with bioactive properties has potential health benefits. © 2024 Society of Chemical Industry.