This chapter focuses on the factors affecting enzymatic hydrolysis of proteins and the functional, nutritive, and immunological properties of protein hydrolysates. The desire to improve the quality of industrially processed food products has provoked great interest recently in the functional properties of protein ingredients. It is well known that proteins from different sources have different properties. The functionality of proteins can be changed by subjecting them to physical and chemical treatments, such as pH, ionic strength, heat, mechanical shear, etc., as well as enzymatic treatments, such as proteolysis. Numerous possibilities exist for improving the functional properties of food proteins by partial enzymatic hydrolysis. Protein hydrolysates with very high degree of hydrolysis normally contain less than 90% protein nitrogen. For instance, in a hydrolysate with a DH of 75% from a raw material with 92% protein in dry matter, the end product will contain only 82.3% protein on dry weight basis, provided no other alterations in dry matter occur.