Edible ingredients derived from phenolic bioactive enriched fruits such as apple can be integrated into food formulations to improve overall human health-relevant functionalities. High phenolic bioactive enriched apple peels were used as a source of dehydrated edible ingredients for formulating cereal-based muffin and apple puree. Prior to utilizing in food formulations, proximate composition, dietary fiber, mineral composition, and phenolic-linked antioxidant activity of the source material, and apple peel dehydrated (APD) powder were evaluated. Furthermore, chemical composition, phenolic-linked antioxidant, anti-hyperglycemic properties (α-amylase and α-glucosidase enzyme inhibitory activities), and sensory properties of the formulated food, muffin, and apple puree, with and without APD powder integration were determined. Total phenolic content, dietary fiber content, total antioxidant activity, and anti-hyperglycemic properties increased with the incorporation of APD powder, specifically in muffin. These results suggested that the APD powder can be rationally utilized as edible ingredients to improve overall nutritional qualities, especially for type 2 diabetes-linked benefits. Practical applications: The practical application of this study is to optimize the processing strategy (selection of the anti-browning agent and hot air drying process) for improving the stability and retention of human health-promoting phenolic bioactives and associated antioxidant and anti-hyperglycemic functionalities in apple peel dehydrated (APD) powder. Additionally, phenolic bioactive enriched APD was integrated as high-value edible ingredients in common cereal-based food formulation (muffin) and apple puree to improve overall type 2 diabetes-relevant benefits linked with anti-hyperglycemic and antioxidant properties. This innovation can be advanced to design novel cereal-based food formulations by integrating phenolic bioactive enriched edible ingredients derived from fruits and vegetables for improved nutritional and health benefits targeting dietary prevention and management of non-communicable chronic diseases, such as type 2 diabetes.