This review aims to provide an updated overview of edible insect proteins and the bioactivity of insect-derived peptides. The essential amino acid content of edible insects is compared with well-known protein sources to demonstrate that edible insects have the potential to cover the protein quality requirements for different groups of the population. Then the current methodologies for insect protein extraction are summarized including a comparison of the protein extraction yield and the final protein content of the resulting products for each method. Furthermore, in order to improve our understanding of insect proteins, their functional properties (such as solubility, foaming capacity, emulsifying, gelation, water holding capacity and oil holding capacity) are discussed. Bioactive peptides can be released according to various enzymatic hydrolysis protocols. In this context, the bioactive properties of insect peptides (antihypertensive, antidiabetic, antioxidant and anti-inflammatory properties) have been discussed. However, the allergens present in insect proteins are still a major concern and an unsolved issue for insect-based product consumption; thus, an analysis of cross reactivity and the different methods available to reduce allergenicity are proposed. Diverse studies of insect protein hydrolysates/peptides have been ultimately promoting the utilization of insect proteins for future perspectives and the emerging processing technologies to enhance the wider utilization of insect proteins for different purposes.