OBJECTIVE The present study was designed to investigate the effect of bark of Pterocarpus santalinus, an ethnomedicinal plant, on blood glucose, plasma insulin, serum lipids and the activities of hepatic glucose metabolizing enzymes in streptozotocin-induced diabetic rats. METHODS Streptozotocin-induced diabetic rats were treated (acute/short-term and long-term) with ethyl acetate:methanol fractions of ethanolic extract of the bark of P. santalinus. Fasting blood glucose, HbA(1C), plasma insulin and protein were estimated before and after the treatment, along with hepatic glycogen, and activities of hexokinase, glucose-6-phosphatase, fructose-1,6-bisphosphatase and glucose-6-phosphate dehydrogenase. Further anti-hyperlipidemic activity was studied by measuring the levels of serum lipids and lipoproteins. RESULTS Phytochemical analysis of active fraction showed the presence of flavonoids, glycosides and phenols. Biological testing of the active fraction demonstrated a significant antidiabetic activity by reducing the elevated blood glucose levels and glycosylated hemoglobin, improving hyperlipidemia and restoring the insulin levels in treated experimental induced diabetic rats. Further elucidation of mechanism of action showed improvement in the hepatic carbohydrate metabolizing enzymes after the treatment. Our present investigation suggests that active fraction of ethanolic extract of bark of P. santalinus decreases streptozotocin induced hyperglycemia by increasing glycolysis and decreasing gluconeogenesis.