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BACKGROUND: The production and consumption of chicken has doubled in the last 17 years. Since slaughter yields range from 70 to 80%, during production various chicken waste residues are generated. One of these residues is waste created after the mechanical separation of chicken meat (W‐MSM). The goal of the circular economy is to manage this waste and transform it into a valuable product. RESULTS: W‐MSM was subjected to hydrolysis by the proteolytic enzymes pepsin and papain to obtain bioactive compounds. Papain digestion resulted in several times higher yields of chondroitin sulfate (CS), hyaluronic acid (HA), peptides and amino acids in comparison with pepsin. The hydrolysis conditions were further optimized using the software Design Expert to evaluate the impact of added enzyme, buffer and duration of the hydrolysis. In addition, the scale‐up of this process was verified with 5 kg of W‐MSM and the obtained product contained approximately 77% (w/w) of peptides, 9% (w/w) of CS, 7% (w/w) of HA and 4% (w/w) of amino acids. CONCLUSIONS: We tested and optimized the method for evaluating the direct waste from poultry processing and transformed it into a product containing bioactive compounds which can be utilized as an ingredient for improving the properties of feed. © 2019 Society of Chemical Industry [ABSTRACT FROM AUTHOR]