This study investigated the synthesis of bioactive peptides from sheep milk through fermentation with Limosilactobacillus fermentum KGL4 MTCC 25515 strain and assessed lipase inhibition, ACE inhibition, α-glucosidase inhibition, and α-amylase inhibition activities during the fermentation process. The study observed the highest activities, reaching 74.82%, 70.02%, 72.19%, and 67.08% (lipase inhibition, ACE inhibition, α-glucosidase inhibition, and α-amylase inhibition) after 48 h at 37°C, respectively. Growth optimization experiments revealed that a 2.5% inoculation rate after 48 h of fermentation time resulted in the highest proteolytic activity at 9.88 mg/mL. Additionally, fractions with less than 3 kDa of molecular weight exhibited superior ACE-inhibition and anti-diabetic activities compared to other fractions. Fermentation of sheep milk with KGL4 led to a significant reduction in the excessive production of NO, TNF-α, IL-6, and IL-1β produced in RAW 267.4 cells upon treatment with LPS. Peptides were purified utilizing SDS-PAGE and electrophoresis on 2D gels, identifying a maximum number of proteins bands ranging 10–70 kDa. Peptide sequences were cross-referenced with AHTPDB and BIOPEP databases, confirming potential antihypertensive and antidiabetic properties. Notably, the peptide (GPFPILV) exhibited the highest HPEPDOCK score against both α-amylase and ACE.