Bioactive substances in foods can represent "extranutritional" constituents naturally present in small quantities in the food matrix, produced upon either in vivo or industrial enzymatic digestion, the latter being a result of food-processing activities. Bioactive constituents of food evoke physiological, behavioral, and immunological effects. Evidence from both epidemiological and animal studies has suggested chemopreventative roles for phytochemicals in certain forms of cancers and in the control of hyperlipidemia. Secondary products of plant metabolism can modulate xenobiotic metabolizing and cholesterol synthetic enzymes. Unique physicochemical properties of food-derived peptides with characteristic amino acid composition and sequences have been reported to influence intestinal transit, modify nutrient absorption and excretion, and exhibit immunostimulating and antihypertensive activity. Biologically active peptides derived from casein, fish muscle, and plant protein hydrolysates have been isolated, purified, and identified in peptide sequence studies. Therapeutic proteins (e.g., specific antibodies) derived from animal products such as milk may offer the potential for developing specialized food products with prophylactic as well as nutritive quality. This paper discusses the physicochemical mechanism of action of specific bioactive substances naturally present in or derived from foods. The biotechnologies employed to develop these products and the issues concerning acceptance by consumer and regulatory bodies are also addressed.