Human breast milk (HBM) is the "gold standard" for infant nutrition. When breast milk is insufficient or unavailable, infant milk formula (IMF) can provide a safe and nutritious alternative. However, IMFs differ considerably from HBM in composition and health function. We compared the digestibility and potential health functions of IMF containing low cream (LC-) or high cream (HC-) with pooled HBM. After simulated infant digestion of these samples, the bioavailability of key nutrients and immunomodulatory activities were determined via cell-based assays. A leaky gut model was established to investigate cream effects on gut health. Distinct differences were observed in peptide diversity and sequences released from HC-IMF compared with LC-IMF during simulated digestion ( < 0.05). Higher levels of free fatty acids were absorbed through 21-day differentiated Caco-2/HT-29MTX monolayers from HC-IMF, compared with LC-IMF and HBM ( < 0.05). Furthermore, the immune-modulating properties of HC-IMF appeared to be more similar to HBM than LC-IMF, as observed by comparable secretion of cytokines IL-10 and IL-1β from THP-1 macrophages ( > 0.05). HC-IMF also supported intestinal recovery in following distortion versus LC-IMF ( < 0.05). These observations suggest that cream as a lipid source in IMF may provide added nutritional and functional benefits more aligned with HBM.