Abstract Dietary habits and lifestyle-related diseases indicate that food has a direct impact on individual health. Hence, a diet containing essential nutrients is important for healthy living. Fish and fish products are important in diets worldwide because of their nutritional value, especially their easily digestible proteins with essential amino acids. Similarly, fish protein hydrolysate (FPH) obtained from fish muscle and by-products has been reported to exhibit various biological activities and to have functional properties, which make FPH a suitable nutraceutical candidate. This review focuses on the health-promoting ability of FPH in terms of skin health, bone and cartilage health, blood lipid profile, and body-weight management studied in rats and human model systems. The absorption and bioavailability of FPH in humans is discussed, and challenges and obstacles of FPH as a functional food ingredient are outlined.