Marine natural products are well-recognized as potential resources to fill the pipeline of drug leads to enter the pharmaceutical industry. In this circumstance, marine-derived fungi are one of the unique sources of bioactive secondary metabolites due to their capacity to produce diverse polyketides and peptides with unique structures and diverse biological activities. The present review covers the peptides from marine-derived fungi reported from the literature published from January 1991 to June 2023, and various scientific databases, including Elsevier, ACS publications, Taylor and Francis, Wiley Online Library, MDPI, Springer, Thieme, Bentham, ProQuest, and the Marine Pharmacology website, are used for a literature search. This review focuses on chemical characteristics, sources, and biological and pharmacological activities of 366 marine fungal peptides belonging to various classes, such as linear, cyclic, and depsipeptides. Among 30 marine-derived fungal genera, isolated from marine macro-organisms such as marine algae, sponges, coral, and mangrove plants, as well as deep sea sediments, species of Aspergillus were found to produce the highest number of peptides (174 peptides), followed by Penicillium (23 peptides), Acremonium (22 peptides), Eurotium (18 peptides), Trichoderma (18 peptides), Simplicillium (17 peptides), and Beauveria (12 peptides). The cytotoxic activity against a broad spectrum of human cancer cell lines was the predominant biological activity of the reported marine peptides (32%), whereas antibacterial, antifungal, antiviral, anti-inflammatory, and various enzyme inhibition activities ranged from 7% to 20%. In the first part of this review, the chemistry of marine peptides is discussed and followed by their biological activity.