Fish protein hydrolysate was prepared from muscle of small red scorpionfish (Scorpaena notata) by treatment with a protease from the fungus Penicillium digitatum. Protein hydrolysate was found to strongly inhibit the angiotensin I converting enzyme and exhibited high antioxidative activity through 1,1-diphenyl-2-picrylhydrazyl free radical scavenging assay. After ultrafiltration, peptides were isolated by a two-step procedure: size exclusion chromatography on a Toyopearl HW-40 followed by reversed-phase high-performance liquid chromatography with a high purification yield of 2.5 mg of peptide per gram of initial protein. Two major peptides were then identified by nanoscale liquid chromatography coupled to tandem mass spectrometry (nano-LC-MS/MS), corresponding to the following sequences: Leu-Val-Thr-Gly-Asp-Asp-Lys-Thr-Asn-Leu-Lys (1,204.665 Da) and Asp-Thr-Gly-Ser-Asp-Lys-Lys-Gln-Leu (992.511 Da). These peptides, mainly composed of hydrophilic amino acids, showed high antioxidative and angiotensin I converting enzyme inhibitory activities. These data suggest that the two novel peptides isolated from the muscle hydrolysate of small red scorpionfish can be a beneficial ingredient for functional foods or pharmaceuticals against hypertension and oxidative stress.