Milk proteins were hydrolyzed by papain and their effect on the rheological, textural and sensory properties of bread were investigated. Water absorption capacity, emulsification capacity, foam volume, foam stability and solubility of Whey and casein protein concentrates and their hydrolysates were determined. The farinograph parameters of wheat flour and blends of wheat flour with casein and whey protein and their hydrolysates were determined to evaluate changes in water absorption capacity, dough development time, dough stability time and mixing tolerance index. The incorporation of WPC, casein and their hydrolysates up to the level of 5 % showed dough properties comparable to control. It was also found that 5 % level incorporation of milk proteins and their hydrolysates have no drastic effect on physical and sensory attributes of bread. The pasting properties showed significant decrease (p≤0.05) when compared with wheat flour at all levels of addition of whey and casein protein concentrates and hydrolysates. Scanning electron microscopy of bread samples shows disruption in the well-defined protein -starch complex of wheat flour bread and the structure of gluten was weak as the concentration of whey protein increases in the wheat flour bread.