Brewer's spent grain (BSG) is a co-product of the brewing industry that has been shown to contain a range of bioactive peptides encrypted within its protein sequences. Two methods were evaluated herein to generate bioactive peptides; (i) an alkaline extracted BSG protein rich fraction (BSG-PI) was hydrolysed using different combinations of proteolytic enzymes and (ii) BSG was pre-treated with carbohydrases followed by direct hydrolysis using proteolytic enzymes (BSG-DH). BSG-DH with Alcalase/Flavourzyme resulted in significantly higher (p < .05) protein yield when compared to BSG-PI (63.09 ± 0.27 and 58.90 ± 1.45%, respectively). The antioxidant activities (ORAC, FRAP and ABTS) of the BSG-PI and -DH hydrolysates differed depending on the assay and proteolytic enzyme combination preparations used for hydrolysis. Inhibition of DPP-IV by the BSG-PI hydrolysates ranged from 87.01 ± 0.15 to 89.61 ± 0.12% while inhibition by the BSG-DH hydrolysates ranged from 35.71 ± 0.72 to 85.06 ± 0.17%. A significant reduction in the release of interleukin-6 in lipopolysaccharide-stimulated RAW 264.7 cells was observed following treatment with BSG-PI hydrolysates generated with Prolyve/Protease P (58.30 ± 13.76%) and Corolase PP/Flavourzyme (48.02 ± 10.82%) when compared to untreated LPS stimulated control cells (100%). BSG-DH hydrolysates were subjected to in vitro simulated gastrointestinal digestion (SGID) which resulted in a reduction in antioxidant activity, an increase in DPP-IV inhibition and no change in the immunomodulatory activity. Ultrafiltration of selected BSG-DH hydrolysates (through 30 and 10 kDa membranes) gave some permeates with enhanced bioactivities. The results demonstrate that direct enzymatic hydrolysis of BSG is a feasible approach for the generation of bioactive peptides without the prior use of an alkali protein extraction step.