In order to utilize squid liver by-products, which is normally discarded as industrial waste in the process of squid manufacturing, salt-fermented squid liver sauce was prepared experimentally and also tested for inhibitory activity against angiotensin converting enzyme (ACE). ACE inhibitory activity of squid liver sauce was increased with the elapse of fermentation days until 12 months, followed by a constant level of inhibitory activity thereafter. 15-month-old sauce ($IC_{50}=29.66;{mu}g$) was filtered through PM-10 membrane (M.W. cut-off 10,000 Da) to obtain the peptides fractions with ACE inhibition activity. Filtered fractions were applied to a Bio-gel P-2 column and three active fractions (A, B and C) were collected. Among them, fraction B applied to a SuperQ-Toyopearl 650S column chromatography lead to the isolation of active B-1 fraction. It has the ACE inhibitory activity ($IC_{50}=5.46;{mu}g$). The main composition of its amino acids is lysine, glycine and proline, which cover about 85% of the total amino acids.