As consumers’ demand for healthy diets grows, the nutritional fortification of milk and dairy products, as important components of the human diet, has gradually become a hot topic in food science and nutrition research. However, some bioactive substances added to milk and dairy products exhibit poor stability and reduced bioavailability due to factors such as processing, storage and transportation conditions as well as gastrointestinal stresses, which limits their promotion and application. Therefore, in order to achieve nutritional fortification of target active components in milk and dairy products, it is essential to develop suitable encapsulation technologies that can effectively enhance the stability of bioactive substances and improve their bioavailability. This article systematically summarizes common bioactive substances in milk and dairy products including bioactive peptides, fatty acids, polyphenols, and probiotics, etc. A systematic review is presented of recent progress in the application of encapsulation technologies such as spray-drying, freeze-drying, emulsification, and complex coacervation in enhancing the processing stability, storage stability, delivery efficiency, and bioavailability of bioactive compounds in milk and dairy products. Moreover, the application of encapsulation technologies for bioactive substances in milk and dairy products is elucidated. The problems of insufficient bio-stability and bioavailability of milk and dairy products are summarized. Finally, future trends in the encapsulation of bioactive compounds in milk and dairy products by intelligent responsive delivery systems and green natural wall materials are envisaged.