Bioactive peptides (BPs) are specific protein fragments that exert various beneficial effects on human bodies and ultimately influence health, depending on their structural properties and amino acid composition and sequences. By offering promising solutions to solve diverse health issues, the production, characterization, and applications of food-derived BPs have drawn great interest in the current literature and are of particular interest to the food and pharmaceutical industries. The microbial fermentation of protein from various sources is indubitably a novel way to produce BPs with numerous beneficial health effects. Apart from its lower cost as compared to enzymes, the BPs produced from microbial fermentation can be purified without further hydrolysis. Despite these features, current literature shows dearth of information on the BPs produced from food via microbial fermentation. Hence, there is a strong necessity to explore the BPs obtained from food fermentation for the development of commercial nutraceuticals and functional foods. As such, this review focuses on the production of BPs from different food sources, including the extensively studied milk and milk products, with emphasis on microbial fermentation. The structure-activity (antihypertensive, antioxidant, antimicrobial, opiate-like, anti-inflammatory, anticancer/antiproliferative, antithrombotic, hypolipidemic, hypocholesterolemic, and mineral binding) relationship, potential applications, future development, and challenges of BPs obtained from food fermentation are also discussed.