Hyperpigmentation often arises from an imbalance in melanogenesis, primarily due to the overexpression of tyrosinase (TYR). While the inhibition of TYR presents a common approach to skin whitening, it can lead to undesirable side effects. Thus, there is growing interest in safe and natural alternatives for TYR inhibition. Bioactive compounds and peptides sourced from split gill mushrooms hold promise in this regard. This study aims to optimize the conditions for papain-mediated hydrolysis of split gill mushroom protein to inhibit TYR activity, utilizing response surface methodology (RSM) and central composite design (CCD). Optimal conditions were determined at a temperature of 46.70 °C, a hydrolysis time of 217.09 min, and an enzyme-to-substrate ratio (E/S) of 1.1%. Under these conditions, the resulting hydrolysates exhibited significant TYR inhibition, with an IC50 value of 117.86 μg/mL and a degree of hydrolysis (DH) of 87.97%. Further purification via ultrafiltration and RP-HPLC yielded a peptide, Tyr-Ala-Ser-Ile-Leu-Leu (YASILL or YL-6), identified through LC-Q-TOF-MS/MS, which competitively inhibited TYR. YL-6 demonstrated an IC50 value of 3.97 mM for mono-phenolase activity and 6.75 mM for di-phenolase activity. Molecular docking analysis revealed hydrogen bonds and hydrophobic interactions between TYR and YL-6. Treatment of B16F10 cells with YL-6 across concentrations ranging from 10-3000 μM showed no cytotoxic effects.The inhibition of melanin synthesis was investigated via qRT-PCR along with Western blot in MITF, TYR, TRP-1, and TRP-2. The results obtained in this research may prove significant in guiding the development of commercially viable cosmetic products to whiten the skin.