Kinnow mandarin (Citrus reticulate L.) peels are a storehouse of well-known bioactive compounds, viz., polyphenols, flavonoids, carotenoids, limonoids, and tocopherol, which exhibit an effective antioxidant capacity. However, naringin is the most predominant bitter flavanone compound found in Kinnow peels that causes their bitterness. It prohibits the effective utilization of peels in food-based products. In the present study, a novel approach for the debittering of Kinnow peels has been established to tackle this problem. A comparative evaluation of the different debittering methods (chemical, microbial, and ultrasound-assisted microbial treatments) used on Kinnow peel naringin and bioactive compounds was conducted. Among the chemical and microbial method; solid-state fermentation with A. niger led to greater extraction of naringin content (7.08 mg/g) from kinnow peels. Moreover, the numerical process optimization of ultrasound-assisted microbial debittering was performed by the Box–Behnken design (BBD) of a response surface methodology to maximize naringin hydrolysis. Among all three debittering methods, ultrasound-assisted microbial debittering led to a greater hydrolysis of naringin content and reduced processing time. The optimum conditions were ultrasound temperature (40 °C), time (30 min), and A. niger koji extract (1.45%) for the maximum extraction rate of naringin (11.91 mg/g). These debittered Kinnow peels can be utilized as raw material to develop therapeutic food products having a high phytochemical composition without any off-flavors or bitterness.