The industry solution to the increased consumer appetite for protein enriched products has been to utilize whey protein isolate and high whey protein concentrates (WPC) in formulations. However, the production of these high whey protein ingredients generates lower protein streams that are underutilized due to lower functionality. A potential solution is the utilization of targeted modification of WPC in combination with whey protein phospholipid concentrate (WPLC), a lower protein, coproduct, to stabilize emulsions. The use of strategically hydrolyzed whey protein along with WPLC, will enhance antioxidant activity and improve emulsion properties resulting in a low cost, clean label protein solution for high value applications, such as encapsulation of bioactives. Our objective was to enhance the emulsification properties and antioxidant activity of WPC through limited hydrolysis and combine with WPLC to improve the oxidative and physical stability of fish oil emulsions. WPC was hydrolyzed (HWPC) by two enzymes, and the protein/peptide profiles were characterized by gel electrophoresis and size exclusion HPLC. Changes in structural properties, namely surface hydrophobicity and zeta potential, were monitored. Antioxidant activity and emulsification properties were assessed. Fish oil was then emulsified with combinations of WPC, HWPC, and WPLC and stored for one week at elevated temperatures to test physical characteristics and hydroperoxide formation. Limited hydrolysis of WPC (7–12% degree of hydrolysis) improved both antioxidant activity and emulsification properties. Protease M hydrolysates had enhanced emulsification properties due to targeted hydrolysis of α-lactalbumin. Whereas, trypsin targeted β-lactoglobulin reducing the surface hydrophobicity, which maintained the emulsification capacity and improved emulsion stability. Finally, antioxidant activity was improved notably for Protease M hydrolysates. Targeted hydrolysis of WPC combined with WPLC can improve the oxidative and physical stability of fish oil emulsions, thus improving the value of these underutilized dairy products. Future work will focus on expanding utilization of these whey protein systems to microencapsulating fish oil.