Milk proteins have attracted extensive interest in terms of their bioavailability following ingestion. Enzymatic digestion of dairy products generates numerous peptides with various biological activities. Both human milk and infant formulas based on cow's milk are potential sources of bioactive peptides. This review aims to present current knowledge on the formation and fate of bioactive peptides from milk feeds intended for infants. Emphasis is placed on the source of the bioactive peptides with the nutritional impact of human milk and cow milk-based formulas on infant health being critically discussed from that perspective. Furthermore, the effect of processing and in vitro or in vivo digestion on the release and availability of peptides with bioactive sequences is evaluated. Considerable differences with respect to bioavailability and metabolic effects between the biologically active fragments generated following ingestion of human milk and infant formulas are documented. Peptides from milk protein of bovine origin could be a valuable supplement to human milk as multiple health-promoting properties are attributed to peptide fractions identified in standard cow milk-based infant formulas.