Historically recognized as a valuable nutritional source, milk contains essential carbohydrates, proteins, and fats that play diverse functional roles in the human body. While the functional roles of milk nutrients and their derivatives are acknowledged, the corresponding functional foods for each milk component remain inadequately documented in Korea. This review aims to describe the functional roles of milk components and their derivatives, as well as assess the landscape of functional food products available in the Korean market. Milk components demonstrate noteworthy functions such as preventing muscle wasting, fortifying bones, aiding in weight control, stabilizing nerves, and serving as prebiotics. Despite these known functions, there exists a plenty of functional substances within milk that have not been comprehensively investigated. Presently, only a limited number of milk-derived functional ingredients are registered in Korea, with a few making their way into commercialization. To advance this field, scientists and industries need research effort to uncover novel functions of milk ingredients and subsequently introduce innovative products to the market. This proactive approach not only promises to broaden the spectrum of functional ingredients but also stands to positively impact the domestic health functional food market and the dairy industry. The development and introduction of new products derived from milk may hold the potential to significantly contribute to the diversification of functional ingredients, fostering a healthier and more robust health food market.