This study investigated the antioxidant, antimicrobial, and anti-atopic dermatitis (AD) effects of a novel peptide (CP) derived from a Chromis notata by-product hydrolysate. Alcalase, Flavourzyme, Neutrase, and Protamex enzymes were used to hydrolyze the C. notata by-product protein, and the 2,2′-azino-bis(3-ethylbenzothiazoline-6-sulfonic acid) (ABTS) radical-scavenging activity was measured. Alcalase hydrolysate exhibited the highest ABTS radical-scavenging activity, leading to the selection of Alcalase for further purification. The CHAO-1-I fraction, with the highest ABTS activity, was isolated and further purified, resulting in the identification of the peptide CP with the amino acid sequence Ala-Gln-Val-Met-Lys-Leu-Pro-His-Arg-Met-Gln-His-Ser-Gln-Ser. CP demonstrated antimicrobial activity against Staphylococcus aureus, inhibiting its growth. In a 2,4-dinitrochlorobenzene (DNCB)-induced AD-like skin model in mice, CP significantly alleviated skin lesions, reduced epidermal and dermal thickness, and inhibited mast cell infiltration. Moreover, CP suppressed the elevated levels of interleukin-6 (IL-6) in the plasma of DNCB-induced mice. These findings highlight the potential of CP as a therapeutic agent for AD and suggest a novel application of this C. notata by-product in the fish processing industry.