The inadequate management of fish processing waste or by-products is one of the major problems that fish industry has to face nowadays. The mismanagement of this raw material leads to economic loss and environmental problems. The demand for the use of these by-products has led to the development of several processes in order to recover biomolecules from fish by-products. An efficient way to add value to fish waste protein is protein hydrolysis. Protein hydrolysates improve the functional properties and allow the release of peptides of different sizes with several bioactivities such as antioxidant, antimicrobial, antihypertensive, anti-inflammatory, or antihyperglycemic among others. This paper reviews different methods for the production of protein hydrolysates as well as current research about several fish by-products protein hydrolysates bioactive properties, aiming the dual objective: adding value to these underutilized by-products and minimizing their negative impact on the environment.