Peanut meal, the primary by-product of commercial oil crushing operations, is an excellent source of protein although aflatoxin contamination often limits applications for this material. Naturally aflatoxin-contaminated (59 ppb) peanut meal dispersions were adjusted to pH 2.1 or pH 9.1, with or without additional protease and/or a clay absorbent, and the resulting soluble extracts derived from these dispersions were spray dried. Clay addition during processing minimally affected spray-drying yields, protein powder solubility or antioxidant capacities, whereas these properties were significantly altered by pH and protease treatments. Spray-dried hydrolysates produced from peanut meal treated with clay contained significantly less aflatoxin than hydrolysates produced without clay; the effects of pH or enzyme on aflatoxin content were minimal. Peanut meal treated with Alcalase, and clay yielded spray-dried hydrolysates with enhanced antioxidant capacity and increased solubility compared to unhydrolysed controls and had aflatoxin levels below 1 ppb.