Abstract: Protein hydrolysis can yield a diversity of bioactive peptides, thus the functional foods containing protein hydrolysates can improve human health. However, the utilization of protein hydrolysates in functional foods is limited for the unpleasant taste attributed to the bitter peptides generated during the hydrolysis process. Without reducing the biological activity of protein hydrolysates, further enzymatic hydrolysis by employing aminopeptidase, carboxypeptidase, or other proteases can effectively attenuate their bitterness, which presents potential applications for developing peptide-based functional foods with low bitterness. Therefore, this paper presents a comprehensive review of the influencing factors of bitterness in protein hydrolysates, the identification of bitter peptides, and the applications of proteases in reducing bitter peptides and improving food flavor. In this review, the factors affecting the bitterness of protein hydrolysates are comprehensively analyzed, which include the composition of bitter peptides, the degree of protein hydrolysis, the types of proteases and the structure-activity relationship of peptides. Additionally, the applications of high performance liquid chromatography-mass spectrometry/mass spectrometry, bioinformatics model and electronic tongue in identifying bitter peptides are also discussed. This paper emphasized the synergistic effect of endopeptidase-exopeptidase combination in reducing the bitterness of protein hydrolysates and optimizing food flavor. This review contributes to a reference for enhancing the sensory quality of protein hydrolysates as well as broadening their utilization in functional foods.