Considerable amounts of fish processing co-products (FPCP) are generated which currently impose a cost burden on the seafood industry in terms of waste disposal, with little benefit generated. The demand for the sustainable use of FPCP has led to the development of processes for the recovery and hydrolysis of proteins, the assessment of their functionalities, and application into different products. The aim of this review is to critically analyze the-state-of-the-art on the functions, applications and production processes of FPCP protein hydrolysates, and identify the key research trends and future research directions that will maximize the economic and environmental benefits for the fish processing industry. FPCP protein hydrolysates have been found to possess desirable physicochemical properties (e.g. emulsifying, foaming, oil and water binding capacities) and many interesting bio-activities (anti-oxidative, anti-hypertensive, anti-microbial and anti-anemia) with potential applications in food, nutritional and pharmaceutical products. Chemical hydrolysis has been the most common process for the production of crude FPCP protein hydrolysates, though with little ability to control product quality. The enzymatic hydrolysis process has emerged recently as the process of choice due to its mild reaction conditions, superior product quality and functionality. The enzymatic processes have been demonstrated at the laboratory scale, but not as in full industrial-scale operation, probably due to the high costs of the enzyme. Advanced cost effective processing technologies need to be developed for the production of high quality FPCP protein hydrolysates that possess specific functionalities for specific product applications. Protein hydrolysates with defined molecular weight ranges, tailor-made for superior functionalities are in high demand. With the discovery of new functions and applications for FPCP protein hydrolysates by refining the traditionally crude product mixture, the fish processing industry can be empowered with advanced value-added processing technology and next generation functional products to successfully turn the "cost center" for the removal of waste into a "profit center" for business growth.