Functional peptides constitute a class of small molecular peptide chains with specific functions in biology and are typically composed of various amino acids. The chemical‐synthesis methods for preparation of functional peptides can bring high toxicity to the human body. Therefore, there is a growing need to explore alternative, safter sources to obtain bioactive peptides. Food‐derived bioactive peptides (FBPs) stand out as an ideal substitution offering safety and accessibility that can be used in health products and pharmaceuticals to elicit their effects. Presently, the extraction, purification, functional properties, and bioavailability of FBPs have been poorly summarized. This review aims to address this gap by summarizing key aspects of FBPs, covering their source, methods of preparation, extraction, isolation, purification, and identification. Additionally, the review explores the functional characteristics and mechanism underlying FBPs. Emphasis is placed on strategies to enhance the stability and bioaccessibility of FBPs, crucial for their successful application in the food and medical industries. Existing research findings suggest that adopting appropriate methods can extract FBPs with high yield and purity. FBPs exhibit both in vitro and in vivo biological activities regulating relevant pathways, showcasing their potential in the medical field. In the quest for improved stability, the application of nanomaterials emerges as a promising strategy. These advancements collectively hint at a bright future for FBPs in both food and medical matrices. As the field progresses, further exploration and refinement of extraction techniques, functional properties, and bioavailability will contribute to unlocking the full potential of FBPs in various applications.