<p>Cottonseed kernel (CK) contains high contents of protein and lipids and can be used as a protein feed ingredient. However, the application of CK in animal feed is limited due to the presence of free gossypol. High levels of free gossypol is toxic to animals by affecting protein digestion, causing liver and kidney damage, and impacting growth and reproduction. Microbial fermentation is an effective processing approach to reduce gossypol, improve nutritional value and produce functional peptides of cottonseed by-product. The objective of this study was to evaluate the influence of microbial fermentation on the free gossypol, nutrients and flavor substances of CK. Then the structure, water and oil holding capacity and in vitro antioxidant activity of derived peptide were examined. Fermentation significantly decreased free gossypol content from 0.12&#xa0;mg/kg to not detected, while increased the contents of crude protein, ether extract, water-soluble protein contents and peptide yields by 5.11%, 9.42%, 40.98% and 39.79%, respectively. Compared with unfermented CK (UCK), the total amino acids, palmitic, oleic acid and linoleic acid contents of fermented CK (FCK) were significantly higher by 114.72%, 24.31%, 14.34% and 14.25%, respectively. Meanwhile, the relative contents of alcohols, aldehydes, esters in FCK were increased by 10.85-fold, 8.75-fold, 8.25-fold compared with UCK. In addition, the derived peptides from FCK (FCKP) possessed higher water and oil holding capacities compared to derived peptides from UCK (UCKP), by 7.01 fold and 22.95%, respectively. In vitro antioxidant assay indicated that FCKP exhibited stronger DPPH, hydroxyl radical scavenging activities and reducing power. In conclusion, microbial fermentation remarkably improved the nutritional value and flavor substances of CK, and derived CK peptide with antioxidant activity.</p> Graphical abstract <p></p>