Abstract: As a major consumer of chicken eggs, the eggshell membrane is recognized as a sustainable biological byproduct in food processing in China. Rich in proteins, the eggshell membrane is regarded as a potential source of bioactive peptides and amino acids, possessing significant nutritional and medicinal value. In recent years, with the advancement of enzymatic hydrolysis technology, eggshell membrane-derived peptides have been increasingly studied due to their unique biological activities. The recent research progress on natural active proteins in eggshell membrane and their artificially hydrolyzed peptides is comprehensively reviewed, with emphasis placed on the preparation methods, biological functions, and application fields of these peptides. First, the composition and biological functions of natural active proteins in eggshell membrane are systematically outlined. Subsequently, preparation methods for eggshell membrane hydrolyzed peptides are summarized, and the characteristics of enzymatic hydrolysis and chemical-assisted enzymatic hydrolysis are compared. The biological functions of hydrolyzed peptides, including their roles in promoting wound healing, anti-inflammatory effects, antioxidant properties, antibacterial activity, and blood glucose regulation are reviewed along with their underlying mechanisms. Finally, current applications of eggshell membrane hydrolyzed peptides in the fields of food, pharmaceuticals, and cosmetics are explored. Future research priorities are also discussed, particularly the potential of digital and informational techniques in predicting the bioactivity and functional analysis of eggshell membrane components. This review is expected to provide new perspectives and references for the high-value utilization of egg processing byproducts.