Bayberry pomace, a nutrient-rich material abundant in dietary fiber (DF), has historically been underutilized due to a lack of thorough research. This study aimed to investigate the physicochemical and functional properties of the DF. Ultrasonic enzymatic treatment was performed to extract the total DF, which was then optimized to produce modified soluble dietary fiber (MSDF) and insoluble dietary fiber (MIDF). The optimized conditions yielded 15.14% of MSDF with a water-holding capacity (WHC) of 54.13 g/g. The DFs were evaluated for their structural, physicochemical, and functional properties. The MSDF showed a higher (p < 0.05) WHC, oil-holding capacity (OHC), swelling capacity (SC), cation exchange capacity (CEC), and glucose adsorption capacity (GAC) (about 14.15, 0.88, 1.23, 1.22, and 0.34 times) compared to the DF. Additionally, the MSDF showed strong, superior radical scavenging and blood sugar-lowering capabilities, with a more porous surface morphology. A Fourier-transform infrared (FT-IR) spectroscopy analysis indicated that enzymatic modification degraded the cellulose and hemicellulose, reducing the DF crystallinity. Overall, the results demonstrated that cellulase hydrolysis could effectively improve the physicochemical and functional properties of DF, thereby paving the way for its development into functional food products.