Background Yeast cells are a rich source of protein and have long been investigated for the production of yeast extract as a source of bioactive peptides with different documented bioactivity, e.g. antioxidant, ACE-inhibitory, antidiabetic, as well as prevention of chronic diseases and providing immune responces. Furthermore, yeast cells are known to contribute to generation of bioactive peptides due to their proteolytic activity during fermentation processes, and also release of antimicrobial peptides during growth. Scope and approach Although reports on preparation and characteristic of yeast extract increased tremendously, research on the functional properties of yeast extract attributed to the content of bioactive peptides and production methods lack a systematic review. Also, the contribution of yeast cells to the production of bioactive peptides during the growth and fermentation process has not been summarized previously. This review summarizes previous studies on yeast-derived peptides, the production methods, the bioactivity, the mechanism of action, as well as the structure-function relationship, and stability of identified peptides. This article would be helpful to promote the application of yeast-derived peptides in research and commercialization. Key finding Yeast cells and yeast extract have great potentials for producing bioactive peptides with multiple functionalities. Current scientific evidence regarding the potential health benefit of yeast highlights the need for additional investigation on the bioactivity of peptides as influenced by production and purification methods. Also, predicting and designing new peptide sequences with specific functionality with the aid of bioinformatics tools, animal and human studies will effectively transfer these findings into practical and market applications.