The production of fish protein hydrolysates (FPH) is a well-established technology for the upgrading of fish by-products. However, the presence of lipids in the FPH may have adverse effects on their quality. Thus, the objective of this study was to prepare and characterise hake protein hydrolysates (HPH) from alkaline solubilised Cape hake by-products proteins previously treated with CaCl2 and citric acid to remove phospholipids (method C). For comparison protein hydrolysates were also prepared directly from raw material (method A) and from the alkaline solubilised proteins (method B). The yields obtained in the preparation of hydrolysates by the methods B and C were considerably lower than that obtained by method A. The hydrolysates prepared by methods B and C had also lower degree of hydrolysis (DH) and protein content, but all HPH presented a well-balanced composition of essential amino acids. The methods B and C led to a high reduction of lipid content of hydrolysates (ca. 90%), however, only the method C allowed a considerable reduction of phospholipids content. HPH-A was visually lighter and HPH-C showed the highest solubility (94.3%), emulsifying activity index (11.7 m(2)/g) and emulsifying stability (97.9%). The addition of the three HPH's to minced gilthead seabream increased its water holding capacity (15.8-19.2%). HPH's exhibited angiotensin converting enzyme (ACE) inhibitory activity at 1 mgmL(-1), indicating the presence of peptides with antihypertensive activity. The method C was effective to remove phospholipids and allow obtaining HPH with good functional properties. Published by Elsevier Ltd.