The present study was designed to encapsulate Kinnow peel powder (KPP) and study its potential to develop functional food. Kinnow peel powder slurry (KPS) was mixed with maltodextrin (MD) and gum arabic (GA) and spray dried. Encapsulated powders were characterized and compared to freeze‐dried KPP based on feed emulsion (KPS:MD:GA), physical, structural, morphological, and antioxidant properties. The powder sample prepared in the combination of KPS:MD:GA = 85:0:15 represented higher encapsulation efficiency (87.83%), viscosity (79 cP), and surface phenolic content (1.22 mg GAE/g). The powder sample prepared with the combination of KPS:MD:GA = 85:15:0 represented higher total phenolics (12.12 mg GAE/g) and flavonoids (7.93 mg QE/g) content. An increase in the concentration of MD/GA increased the flow behavior and reduced the powder flowability. Hausner ratio (1.284), and Carr index (22.03%) were observed lower for the sample prepared in the combination KPS:MD:GA = 85:15:0. Fourier transform infrared spectroscopy (FTIR) analysis revealed the retention of functional compounds with spray drying. Conclusively, the prepared encapsulated powder can be a functional ingredient for developing different food products, which could valorize Kinnow peel.Practical applicationsThe present study offers a practical method for encapsulating Kinnow peel powder using spray drying, employing maltodextrin and gum arabic. These encapsulates effectively preserve the bioactive compounds or Kinnow peel powder, even those sensitive to heat. The resulting powder can enhance the functional attributes of various food products, including antioxidant activity and anti‐inflammatory properties. Additionally, the powder can significantly improve the taste and texture of food products. Consequently, the prepared encapsulated powder exhibits promising potential as a functional ingredient in developing various food products, adding value to Kinnow peel and promoting sustainable utilization.