Edible marine species are valuable sources of bioactive peptides. This study investigated the ACE-inhibitory activity of protein hydrolysates from the red algae Gracilaria tenuistipitata. Fifteen groups of protein hydrolysates were prepared by a two-step enzymatic hydrolysis of G. tenuistipitata: initial hydrolysis with several glycolytic enzymes, followed by three separate proteolytic reactions (Alcalase, Neutrase and Flavourzyme) for 2–10 h. Results showed that the hydrolysate GTN4H had the highest ACE-inhibitory activity in vitro. Furthermore, oral administration of GTN4H significantly reduced systolic blood pressure in spontaneously hypertensive rats. Fraction A derived from GTN4H displayed the highest ACE-inhibitory activity among fractions. Further purification of fraction A by RP-HPLC obtained a purified peptide (MW: 1776 Da) with 17 amino acids and 95.4% ACE-inhibitory activity.