Seaweeds are currently an under-utilized source of proteins and peptides with great potential for the nutraceutical and functional food sectors. Due to the high cost of animal-sourced proteins, extensive research into alternative protein sources has been recently conducted. On the other hand, environmental and health issues caused by animal-sourced proteins, as well as animal welfare concerns, have drawn attention to alternative and sustainable sources of dietary protein. In terms of nutrition, seaweeds contain not only a significant amount of protein but also all of the essential amino acids (EAAs), which are vital for preserving good health. In addition, the processing of these proteins can result in the generation of bioactive peptides with a wide variety of health-promoting potentials, such as cardio-protective, antioxidative, antidiabetic, and immunomodulatory activities. This chapter analyses the literature available on the use of seaweeds as sources of proteins and EAAs, briefly summarizing current research available on the generation of bioactive peptides and their health-promoting activities. Key aspects of the use of seaweeds or seaweed protein ingredients, such as their techno-functional properties for the incorporation of seaweed proteins into foods, will also be covered in detail, together with the current challenges and bottlenecks hindering the full utilization of this biomass and future research needed to overcome them, helping to turn seaweed into a viable protein source for the processing and development of novel functional foods.