The angiotensin I-converting enzyme (ACE) inhibitory activity of protein hydrolysates from tilapia muscle fractions, namely mince (M), washed mince (WM), and sarcoplasmic protein (SP), were investigated. Each fraction was hydrolyzed by Virgibacillus halodenitrificans SK1-3-7 proteinases for up to 24 h. After 8 h of hydrolysis, the M hydrolysate (48% degree of hydrolysis (DH)) showed the highest ACE inhibitory activity, with an IC50 value of 0.54 mg/ml, while the SP hydrolysate exhibited the lowest DH and ACE inhibition. In vitro gastrointestinal digestion reduced the ACE inhibitory activity of the M hydrolysate but enhanced its transport across Caco-2 cell monolayers. The transported peptides were found to contain 3–4 amino acid residues showing strong ACE inhibition. The novel ACE inhibitory peptide with the highest inhibition was found to be MCS, with an IC50 value of 0.29 μM. Therefore, tilapia mince hydrolyzed by V. halodenitrificans proteinases contained ACE inhibitory peptides that are potentially bioavailable.