Swim bladders from the freshwater fish Piaractus brachypomus are a rich source of Type I collagen, representing a sustainable alternative for collagen extraction and the valorization of fish-processing by-products. The present study aimed to isolate Acid-Soluble Swim Bladder Collagen (ASSBC), characterize its structural and functional properties, produce low-molecular-weight collagen peptides through papain hydrolysis, and evaluate their antioxidant, antimicrobial, cytocompatibility, and wound-healing activities. ASSBC was extracted using acetic acid and characterized by Lowry protein estimation, SDS-PAGE, UV-visible spectroscopy, FTIR spectroscopy, SEM, and EDAX analyses. Bioactive collagen peptides were generated by papain hydrolysis and evaluated using DPPH radical scavenging, antimicrobial, MTT cytotoxicity, and in vitro scratch wound-healing assays. The extraction process yielded 62.0 ± 2.3% collagen (wet-weight basis) and 13.3 ± 0.6% collagen (dry-weight basis). The extracted collagen exhibited a protein concentration of 74.0 ± 2.1 µg/mL. SDS-PAGE analysis confirmed the presence of Type I collagen with characteristic α₁/α₃ (114 kDa), α₂ (98 kDa), β (193 kDa), and γ (272 kDa) chains. Papain hydrolysis successfully generated low-molecular-weight collagen peptides with an approximate molecular weight of 6 kDa. The hydrolyzed collagen peptides exhibited 59.80 ± 1.7% DPPH radical scavenging activity and demonstrated antibacterial activity against Salmonella spp. (14.0 ± 0.8 mm) and Staphylococcus spp. (7.0 ± 0.5 mm), together with antifungal activity against Penicillium spp. (20.0 ± 0.9 mm) and Aspergillus niger (8.0 ± 0.6 mm). MTT assay demonstrated high cytocompatibility toward NIH-3T3 fibroblast cells up to 50 µg/mL, with cell viability remaining above 90%. In the scratch wound-healing assay, collagen peptide-treated cells exhibited accelerated wound closure, reducing the wound gap from 100% to 5.8 ± 0.6% after 48 hrs, whereas the untreated control retained 24.6 ± 1.3% of the wound gap. These findings demonstrate that the swim bladder of Piaractus brachypomus is an excellent source of structurally intact Type I collagen and bioactive low-molecular-weight collagen peptides with potential antioxidant, antimicrobial, cytocompatibility, and wound-healing properties. The study highlights the potential application of this underutilized fish-processing by-product in the development of sustainable biomaterials for regenerative medicine and wound-healing applications.