Dietary proteins have important physiological functions beyond the provision of amino acids for protein synthesis. A broad spectrum of effects spanning diverse physiological responses can be attributed to protein ingestion. The gastrointestinal tract plays a dominant role in mediating these effects during the process of protein digestion through the release of encrypted biologically active peptides that act locally or postabsorptively. This review examines the role of dietary proteins, with emphasis on milk proteins, and their derived biologically active peptides on protein synthesis, gut functions, and the regulation of metabolism and food intake. Furthermore, the implications for infant feeding and the development of physiological regulation are addressed.