Marine organisms are potentially an untapped source of drugs and value-added food production. Currently, Acetes chinensis is an underutilized shrimp species with low commercial value from the Bo Hai Gulf of China. In this paper, the shrimp was digested by a crude protease from Bacillus sp. SM98011 and filtered through a 3 kDa ultrafiltration membrane. Biological functions of the hydrolysate and ultrafiltrate were then assayed. The analyses showed that 41% of the oligopeptides in the ultrafiltrate had a molecular mass lower than 3 kDa. The antioxidant activities of the hydrolysate and ultrafiltrate were determined through the scavenger activity of the hydroxyl radical, with inhibitions of 42.38% and 67.95%, respectively. The hydrolysate and ultrafiltrate also had good Angiotensin-I-converting enzyme (ACE) inhibitory activity, with IC50 values of 0.98 mg/ml and 0.22 mg/ml.. respectively. In addition, Chitin and chitosan were recovered from the hydrolytic sediment using a much smaller volume of strong acids and bases than is normally needed. With this method, we have shown that A. chinensis can be utilized to generate a high value-added product, and have revealed its hidden potential in the production of functional foods and ACE inhibitory peptides. (c) 2005 Elsevier Ltd. All rights reserved.