This study was conducted to optimize the size of olive flounder Paralichthys olivaceus (OF) as a material of sikhae and to investigate the quality characteristics. The results on the protease activity of OF meat, protein and ash contents of the bone, and yields and hardness of fish bone during fermentation time suggest that the suitable fish weight for sikhae was less than 250 g. The proximate compositions of the OF sikhae fermented under optimum condition (fermentation for 9 days at 15°C), were 73.0% moisture, 12.0% crude protein, 1.3% crude fat and 2.4% ash. The salinity, titration acidity and amino acid nitrogen contents per 100 g sikhae were 1.7 g, 2.46 g, and 311.3 mg, respectively. The lactic acid bacteria concentration in the sikhae were 8.84 log CFU/g, which were higher than those (5.78–6.62 log CFU/g) of 5 kind of commercial flounder sikhae. The functional properties, such as ACE inhibitory activity (69.0%), antioxidative activity (69.3%), α-glucosidase inhibitory activity (22.7%), xanthine oxidase inhibitory activity (88.2%), and nitrite scavenging activity (96.4%) of the sikhae were superior to those of 5 kind of commercial flounder sikhae.