Peptide drugs possess superior biocompatibility and excellent specificity, making them a reliable choice in clinical treatment. They exert critical roles in disease-associated metabolic reprogramming and immune modulation by activating cell signaling pathways, regulating metabolic processes, and immune cell functions. Notably, circular RNAs (circRNAs) have been shown to encode functional polypeptides. This finding offers new avenues for peptide drugs development. However, a summary of circRNA-encoded polypeptides as peptide drug applications is relatively lacking. Therefore, we summarize the latest scientific advances in peptide drugs in the realm of diseases, with the focus on circRNA-encoded polypeptides. We first delve into the functional mechanisms of peptide drugs within disease-associated metabolic reprogramming and immune response. Subsequently, we provide an overview of the delivery and modification strategies of peptide drugs. Additionally, we summarize the encoding mechanisms of circRNAs and review the drug-like applications of the polypeptides. We also highlight the potential challenges in the future development of circRNA-based polypeptide drugs. In summary, we offer a systematic review of the research progress on circRNA-encoded polypeptides, with the aim of providing novel perspective and ideas for the design and development of peptide drugs.