Hypoglycemic effects of berberine (BBR) have been reported in several studies in cell and animal models. However, the mechanisms of action are not fully understood. The present study was therefore aimed at determining the effect and underlying mechanisms of action of BBR on diabetes in a high-fat diet- and streptozotocin-induced diabetic rat model. Ninety male Sprague-Dawley rats, 150 to 170 g, were housed individually in cages. Two groups (n = 12 each) were fed the AIN-93G diet (normal control) and the same diet modified to contain 33% fat and 2% cholesterol (high-fat control), respectively. The third group (n = 66) was fed the high-fat diet and injected intraperitoneally 2 weeks later with 35 mg/kg body weight of streptozotocin in citrate buffer (pH 4.5). The rats in both control groups were injected with the vehicle. After 12 days, rats with semifasting (5 hours) blood glucose levels between 14 and 25 mmol/L were divided into 4 groups (n = 12 each) and treated with 0 (diabetic control), 50, 100, and 150 mg/kg/d of BBR for 6 weeks while continuing on the high-fat diet. Hypoglycemic effects of BBR were consistently demonstrated by semifasting and fasting blood glucose levels, and insulin-sensitizing effects were seen during oral glucose tolerance testing. Berberine also reduced food intake while having no effect on body weight in diabetic rats. No effect of BBR was observed on plasma levels of insulin, adipokines (leptin and adiponectin), or inflammatory cytokines (tumor necrosis factor-α and C-reactive protein). Berberine did not affect the state of oxidative stress as assessed by the activity of superoxide dismutase and the concentrations of malondialdehyde and reduced and oxidized glutathione in the liver. These findings demonstrated the hypoglycemic and insulin-sensitizing capabilities of BBR, with the underlying mechanisms awaiting further investigation.