Protein hydrolysis is a process used in the food industry to generate bioactive peptides of low molecular weight and with additional health benefits, such as antihypertensive, antidiabetic, and antioxidant properties that are often associated with their content on hydrophobic amino acids. This results in an increased bitterness of the products, making them less desirable for their use in food formulations. This review summarizes the main dietary sources of bitter bioactive peptides, including methods to determine their bitterness, such as the Q-values and electronic tongue; and the main factors and mechanisms underlying the bitterness of these compounds. The main strategies currently used to improve the taste and oral delivery of bioactive peptides are also discussed together with the main advantages and drawbacks of each technique. Debittering and masking techniques are reported in detail, including active carbon treatments, alcohol extraction, isoelectric precipitation, chromatographic methods, and additional hydrolytic processes. Other masking or blocking techniques, including the use of inhibitors, such as modified starch, taurine, glycine, and polyphosphates, as well as chemical modifications, such as amination, deamination, acetylation, or cross-linking were also discussed. The findings of this work highlight encapsulation as a highly effective method for masking the bitter taste and promoting the bioactivity of peptides compared to other traditional debittering and masking processes. In conclusion, the article suggests that advanced encapsulation technologies can serve as an effective means to mitigate the bitterness associated with bioactive peptides, while simultaneously preserving their biological activity, increasing their viability in the development of functional foods and pharmaceuticals.