Diabetes is an important chronic disease and the 4th leading cause of death in Taiwan. Hyperglycemia-induced oxidative and inflammatory damage are the main causes of chronic complications in diabetic patients. The red guava (red-fleshed guava cultivar of Psidium guajava L.) is a tropical fruit belonging to the Myrtaceae family and an important commercial crop in Taiwan. In this study, the protective effects of a diet containing red guava on inflammation and oxidative stress in streptozotocin (STZ)-induced diabetic mice were examined. The experimental group was divided into seven subgroups: normal (N), diabetes mellitus (DM), diabetes + red guava 1% (L), 2% (M), and 5% (H), diabetes + 5% red guava + anti-diabetic rosiglitazone (HR), and diabetes + anti-diabetic rosiglitazone (R). The mice were fed for 8 weeks and sacrificed by decapitation. Compared with the DM group, the experimental groups with diets containing red guava as well as rosiglitazone all showed significant improvements in blood glucose control, insulin resistance, creatinine, blood urea nitrogen, triglycerides, non-esterified fatty acids, cholesterol, c-reactive protein, TNF-α, and IL-10. Furthermore, the expression of inflammatory proteins, such as iNOS and NF-κB, was suppressed via activated PPARγ, and the expression levels of GPx3 and ACO increased. In summary, red guava can significantly suppress inflammatory and oxidative damage caused by diabetes and alleviate diabetic symptoms; thus, it exerts protective effects and has potential applications for the development of a dietary supplement.