Elevated plasma glucose concentration, as a consequence of excessive hepatic glucose production, plays a pivotal role in the development of diabetes. A chromogranin A-derived diabetogenic peptide Pancreastatin (PST) enhances hepatic glucose output leading to diabetes. Therefore, here we probed the role of PSTi8, a PST inhibitor in ameliorating diabetes by investigating the effect of high glucose (HG) or PST on glucose metabolism. Further, we also explored the action mechanism of the underlying anti-hyperglycemic effect of PSTi8. PSTi8 treatment rescue cultured L6 and HepG2 cells from HG and PST-induced insulin resistance, respectively. It also enhances insulin receptor kinase activity by interacting with the insulin receptor and enhancing GLUT4 translocation and glucose uptake. Thus, our in-silico and in-vitro data support the PST-dependent and independent activity of PSTi8. Additionally, PSTi8 treatment in streptozotocin-induced diabetic rats improved glucose tolerance by lowering blood glucose and plasma PST levels. Concomitantly, the treated animals exhibited reduced hepatic glucose production accompanied by downregulation of hepatic gluconeogenic genes PEPCK and G6Pase. PSTi8-treated rats also exhibited enhanced hepatic glycogen in line with reduced plasma glucagon concentrations. Consistently, improved plasma insulin levels in PSTi8-treated rats enhanced skeletal muscle glucose disposal via enhanced P-Akt expression. In summary, these findings suggest PSTi8 has anti-hyperglycemic properties with enhanced skeletal muscle glucose disposal and reduced hepatic gluconeogenesis both PST dependent as well as independent.