This research evaluated the proteolytic activity of Iranian and commercial probiotic strains (e.g., Bifidobacterium lactis, Lactobacillus acidophilus, and Lactobacillus casei) in yoghurt during 28 days of storage. Water-soluble peptides were extracted using high-speed centrifugation. 2,2-Diphenyl-1-picrylhydrazyl (DPPH) and 2,2′-azinobis-(3-ethylbenzothiazoline-6-sulfonic acid) (ABTS) methods were used to evaluate the bioactive activities of water-soluble peptide extract (WSPE). Antimutagenic and antibacterial activity against Staphylococcus aureus was investigated using the Ames test and agar gel diffusion method, respectively. There was a direct relationship between formation of bioactive peptides and degree of proteolysis. There was a significant difference between the probiotic and control samples. S. thermophilus + L. bulgaricus + Iranian strain of B. lactis had the highest antioxidant, antimutagenic and antibacterial activities. Therefore, Iranian B. lactis has a high potential for producing bioactive peptides having health benefits in commercial foods such as yoghurt, novel products and therapeutic peptides.