The aim of this work was to study how raw material mixtures combined from different separated cod (Gadus morhua) by-products influenced the composition of the substrate for hydrolysis. The influence of using an endo-peptidase (Flavourzyme) or exo-peptidase (Neutrase) and the amount of added water on yield, nutritional, physicochemical and functional properties of the hydrolysis products was also studied. All freeze-dried fish protein hydrolysates (FPH) powders had a light yellow colour and contained 75-92% protein. The dried insoluble material, sludge, was a grey, greasy powder containing 55-70% protein. Degree of hydrolysis was 18.5-33.7% for FPH and 4.3-10.9% for sludge. Different ways of combining fish by-products lead to different end products with different properties after hydrolysis. Raw material containing the highest amount of lipids gave the lowest percentage of solubilised proteins. Addition of water before hydrolysis Was more important than the type of enzyme used for yield, biochemical and functional properties of FPH and sludge. Protein efficiency ratio (PER) of sludge was generally 1.5 times higher than PER value of FPH. Sludge made up a large part after hydrolysis compared to fish protein hydrolysate, contained a significant part of the total protein and had good functional properties, in some cases even better than the FPH, which is often considered the main product of protein hydrolysis. (c) 2004 Elsevier Ltd. All rights reserved.