Tilapia is a kind of fish with a huge amount of aquaculture, and a lot of byproducts are wasted in processing. Of these, fish skin is the most valued due to its high content of gelatin, which has good characteristics such as low hypoallergenic, biocompatibility, and permeability. In this study, a novel pentapeptide (Leu‐Ser‐Gly‐Tyr‐Gly, LYG) was isolated from gelatin gastrointestinal digests of tilapia skin and verified the anti‐inflammatory and antiangiogenic activity of LYG, which can inhibit scar formation. In addition, the active sites were analyzed using molecular docking. The key active amino acids Leu and Tyr of LYG were able to form hydrogen bonds and good hydrophobic structures with transforming growth factor β1 (TGF‐β1). Hyperplastic scar (HS) is a common fibrous proliferative disorder of the skin, and fibrosis is the process of scar formation. It is well known that the inhibition of collagen and angiogenesis is an effective way to combat HS. The results of this study show that LYG inhibited collagen synthesis and inflammatory stress in mouse fibroblasts (L929), suppressed the angiogenic signaling pathway in vascular endothelial cells (HUVECs), and reduced scar formation after wound healing in mice. This study provides new ideas for improving the diversified use of tilapia resources.