Concerns over the environmental and waste disposal problems created by the large amounts of by-products generated from fish processing industries are increasing worldwide. The bioconversion of those marine waste by-products through the enzymatic hydrolysis of their protein content offers the possibility for the development of bioactive peptides for use in various biotechnological applications. The present study aimed to investigate and evaluate the biological and functional properties of smooth hound (Mustelus mustelus) protein hydrolysates (SHPHs) obtained by treatment with intestinal and gastric enzyme preparations from M. mustelus viscera and porcine pancreatin. The results revealed that the SHPHs exhibited different degrees of hydrolysis and antioxidant activity. The hydrolysate produced by the intestinal crude extract presented the highest rate of antioxidative activity, showing an IC50 value of 1.47 ± 0.07 mg/mL in 1,1-diphenyl-2-picrylhydrazyl (DPPH) scavenging assays. The alkaline protease extract from the intestine of M. mustelus produced hydrolysate with the highest angiotensin I-converting enzyme (ACE) inhibitory activity (82 ± 1.52% at 2 mg/mL). All the protein hydrolysates showed excellent solubility and interfacial properties that were governed by pH. The major amino acids detected in SHPHs were glutamic acid/glutamine, aspartic acid/asparagine, histidine and arginine, followed by methionine, phenylalanine, serine, valine and leucine. Overall, the results indicated that smooth hound by-products can be used to generate high value-added products, thus offering a valuable source of bioactive peptides for application in wide range of biotechnological and functional food applications.