The aim of this study was to utilise by-product pepper leaves for vinegar production due to its nutritional value. Changes in physicochemical and functional properties in four main process from raw material (leaves) to lactic acid (juice), alcohol (wine) and acetic acid (vinegar) fermentations were evaluated and compared. Their nutritional compositions were significantly different and particularly the wine and vinegar had higher total phenol content and their expanded diversity than the juice and then leaves (P < 0.05). Difference in values for phenolic compound was highly correlated with their α-glucosidase inhibitory (AGI) and antioxidant capacities in DPPH and superoxide radical scavenging and reducing power assays (r = 0.919–0.981); vinegar ≥ wine > juice > leaves. Especially, AGI activity was greatly enhanced depending on fermentation steps beyond expectation. Thus, these data confirm that pepper leaves is a good functional source and the vinegar fermentation improved the functionality in stages.