Bioactive peptides encrypted within the native milk proteins can be released by enzymatic proteolysis, food processing, or gastrointestinal digestion. These peptides possess a wide range of properties, including immunomodulatory properties. The first months of life represent a critical period for the maturation of the immune system because a tolerance for nutrient molecules should be developed while that for pathogen-derived antigens is avoided. Evidence has accumulated to suggest that milk peptides may regulate gastrointestinal immunity, guiding the local immune system until it develops its full functionality. Our data using the weaning piglet as the model suggest that several milk peptides can downregulate various immune properties at a time (one to two weeks after weaning) that coincides with immaturity of the immune system. The protein kinase A system and/or the exchange protein directly activated by cyclic AMP (Epac-1) are implicated in the mechanism through which milk peptides can affect immune function in the early postweaning period. Despite the fact that the research in this field is in its infancy, the evidence available suggests that milk protein peptides may promote development of neonatal immune competence. Milk contains a variety of components that provide immunological protection and facilitate the development of neonatal immune competence. Two main categories of milk compounds are thought to be associated with immunological activity. The first category includes cytokines, which neonates do not produce efficiently. Cytokines present in milk are thought to be protected against intestinal proteolysis and could alleviate immunological deficits, aiding immune system maturation (Kelleher & Lonnerdal, 2001; Bryan et al., 2006). The second category of milk compounds includes milk protein peptides. Milk peptides may affect mucosal immunity possibly by guiding local immunity until it develops its full functionality (Baldi et al., 2005). This chapter focuses on the effects of milk peptides on immune function and attempts to provide an overview of the knowledge available in this field.