A large number of by-products such as highland barley distiller's grains (HBDG) were produced by the highland barley liquor enterprises. However, at present, due to improper treatment, it leads to waste of resources and environmental pollution. In this study, ultrasonic and cellulase assisted alkaline extraction and acid precipitation were used to extract highland barley distiller's grains crude protein (HBDGP) from HBDG. The extraction rate of HBDGP reached 76.10% and the purity was more than 78%. Highland barley distiller's grains protein protease hydrolysates (HBDGPH) prepared by ultrasound assisted alkaline protease hydrolysis had potential antioxidant and hypoglycemic activities. The DPPH clearance rate of 10 mg/mL hydrolysate reached 90.00% and the antioxidant activity has good stability to temperature and pH. The hypoglycemic activity of the hydrolysate was also determined and the inhibition rates of α-amylase and α-glucosidase were 37.37% and 32.28%, respectively. Furthermore, HBDGPH was identified to contain amount of amino acids that can enhance the antioxidant and hypoglycemic activities. These findings are helpful to promote the high-value utilization of HBDG and provide a new source of active peptides.