A casein–gelatin composite was prepared by cross-linking of caseinate and bovine gelatin with a microbial transglutaminase, and the impact of limited proteolysis by trypsin on some functional properties of the composite was investigated in the present work. Two hydrolysed composites were prepared with degree of hydrolysis (DH) of 1 and 2% and analysed by SDS-PAGE to reflect polypeptide profiles. Some functional properties of the two hydrolysed composites were evaluated, among which solubility, digestibility in vitro, surface hydrophobicity and emulsifying properties showed dependence on the DH. Limited proteolysis of the composite improved its solubility in pH 3–10, especially when the DH was 2%. Compared to the composite, the hydrolysed composites showed an increased emulsifying activity index (about 357–408%), emulsion stability index (about 23–28%) and digestibility in vitro (about 65–80% for pepsin, whereas 2–3% for pepsin–trypsin hydrolysis), together with a decreased surface hydrophobicity (about 55–62%) and oil absorption capacity (about 20–23%). The applied proteolysis also led to the aqueous dispersions of the two hydrolysed composites much lower apparent viscosity, storage and loss modulus.