Caffeic acid phenethyl ester (CAPE) is a naturally occurring phenolic compound with various biological activities. However, poor water solubility and storage stability limit its application. In this context, sorghum peptides were used to encapsulate CAPE. Sorghum peptides could self-assemble into regularly spherical nanoparticles (SPNs) by hydrophobic interaction and hydrogen bonds. Solubility of encapsulated CAPE was greatly increased, with 9.44 times higher than unencapsulated CAPE in water. Moreover, the storage stability of CAPE in aqueous solution was significantly improved by SPNs encapsulation. In vitro release study indicated that SPNs were able to delay CAPE release during the process of gastrointestinal digestion. Besides, fluorescence quenching analysis showed that a static quenching existed between SPNs and CAPE. The interaction between CAPE and SPNs occurred spontaneously, mainly driven by hydrophobic interactions. The above results suggested that SPNs encapsulation was an effective approach to improve the water solubility and storage stability of CAPE.