Bioactive peptides derived from animal sources have attracted growing interest in functional food and pharmaceutical research due to their diverse physiological activities and high bioavailability. Loach (Misgurnus anguillicaudatus), a protein-rich freshwater fish with low fat content, has emerged as a promising source of bioactive peptides. Recent studies have found that loach peptides have many biological effects, such as anti-oxidation, anti-fatigue, anti-bacteria, immunomodulation, anti-cancer, anti-hypertension, and anti-osteoporosis activities. In this review, the preparation, separation, purification and characterization of loach peptides were summarized. The recent progress of biological functions of loach peptides was also discussed. At present, the research of loach peptide is still in the initial stage, the relationship between the structures and functions of loach peptides, the molecular mechanisms of the function of loach peptides are needed to be further studied. In addition, this review addresses the challenges associated with the application of loach peptides and summarizes recent advances in their deep-processing and high-value utilization, aiming to provide a reference for future studies and to facilitate the continued development and broader application of loach peptides.