Erica australis L. (Ericaceae) is used in traditional medicine to treat many free-radical related ailments. In the present work, the stability and biological activity of the plant aqueous extracts submitted to an in vitro digestive process were investigated. Chemical stability was monitored by HPLC-DAD and LC-MS/MS, while the bioactivities were evaluated through the inhibition of acetylcholinesterase (AChE) and DPPH radical scavenging activity. Both extracts, whose main components were flavonol glycosides, inhibited AChE, showing IC50 values of 257.9 ± 6.2 µg/mL and 296.8 ± 8.8 µg/mL for the decoction and for the infusion, respectively. Significant radical scavenging activities were also revealed by both extracts, as denoted by the IC50 values for the decoction, 6.7 ± 0.1 µg/mL, and for the infusion, 10.5 ± 0.3 µg/mL. After submission to gastric and pancreatic juices, no remarkable alterations in the composition or in the bioactivities were observed, suggesting that the extracts may pass through the gastrointestinal tract, keeping their composition and therefore their biological properties. Moreover, the bioavailability of the components of both extracts, as studied in a Caco-2 cell model, showed that compounds can permeate the membrane, which is a condition to exert their biological activities. Our results add further support to the potential of E. australis for its antioxidant and neuroprotective properties.