We investigated the delivery of calcium-alginate encapsulated peptidase (Flavourzyme®, Aspergillus oryzae) on proteolysis of Cheddar cheese. Physical and chemical characteristics such as moisture, pH and fat content were measured, and no differences were found between control and experimental cheese at day 0. SDS-PAGE analysis clearly showed that proteolysis of α and k casein was significantly accelerated after three months of maturity in the experimental cheese. A large number of low molecular weight peptides were found in the water soluble fraction of the experimental cheeses and some of these peptides were new. N-terminal amino acid sequence analysis identified these as P1, Leu-Thu- Glu; P3, Asp-Val-Pro-Ser-Glu and relatively abundant stable peptides P2, P4, Arg-Pro-Lys-His-Pro-Ile; P5, Arg-Pro-Lys- His-Pro-Ile-Lys and P6. These peptides were mainly originated from αs1-CN and β-CN. Four of the identified peptides (P1, P2, P3 and P4) are known to be biologically active and P1 and P3 were only present in experimental cheese suggesting that experimental cheese has improved health benefits.