There has been great interest in developing isolated dairy lipid fractions that are rich in phospholipids (PLs) due to their health benefits and functional properties. Dairy by-products that contain elevated content of PLs and milk fat globule membrane (MFGM) proteins, which are currently being discarded, can be an excellent source for these isolates. The β stream (a by-product of skim milk and anhydrous milk fat production) is a perfect candidate since it contains a higher concentration of PLs and MFGM proteins than many other dairy by-products. In this study, we investigated an economically feasible processing method to obtain the valuable components from the β stream. Various zinc acetate and calcium acetate concentrations (0–200 mM), heat treatments (30 and 60°C), and pH adjustments (5.0–8.0) were investigated to determine how effectively PLs and proteins were precipitated into a pellet. With a subsequent extraction of lipids from the pellet using ethanol (90%, 70°C), a PLs-enriched lipid fraction and good quality dairy proteins were obtained. The optimum precipitation conditions for the β stream were zinc acetate (25 mM) at pH of 7.5 and 30°C, and calcium acetate (100 mM) at pH of 7.5 and 60°C. With the ethanol extraction, PLs recovery of 97.7% from the zinc acetate precipitate and 94.9% from calcium acetate precipitate were achieved.