<p>Onion production generates a substantial amount of waste rich in bioactive compounds with noteworthy biological properties. This study aimed to extract bioactive compounds from onion peels (OP) using a Soxhlet apparatus in a solid-liquid extraction. The extracted compounds were then encapsulated by applying the double emulsion technique and using ethyl cellulose (EC) as an encapsulating agent, followed by their incorporation into a cream cheese to extend its shelf life. Antioxidant capacity was determined using ABTS and DPPH assays, while total phenolic content (TPC) was quantified by the <i>Folin-Ciocalteu</i> method. The extract demonstrated strong antioxidant activity by scavenging ABTS and DPPH radicals, and the value of TPC was 396.7 mg_GAE∙g_extract⁻¹. Additionally, the extract inhibited the activity of α-amylase and β-glucosidase by 91.9 and 95.8%, respectively, demonstrating potential anti-diabetic properties. The microencapsulated OP extract revealed a production yield of 73.9% and an encapsulation efficiency of 71.2%. The microparticles exhibited a round-shaped morphology, with size variation indicated by a polydispersity index of 1.38 and showed greater thermal stability than the free OP extract. Evaluation of the extract and microparticles in cream cheese fortification demonstrated that the samples exhibited reduced syneresis, maintained stable moisture content, and offered extended protection against lipid oxidation compared to the negative control. In addition, both fortified samples also had higher TPC and increased antioxidant capacity. Therefore, incorporating free and microencapsulated OP extract into cream cheese offers a sustainable approach to valorising onion waste, enhancing product quality while promoting circular economy principles.</p> Graphical Abstract <p></p>