Objective Huidouba (HDB) is a Chinese folk medicine used to treat diabetes in Sichuan Province, China. Therefore, we investigated the anti-diabetic effects of HDB and its underlying mechanisms. We hypothesized that HDB treatment could enhance glucose tolerance and insulin sensitivity, and thus prevent a hyperglycemia state. Methods To test the hypothesis, streptozotocin (STZ)-induced diabetic mice and db/db mice, widely used models of hyperglycemia and insulin-resistant diabetes, were either treated with HDB, metformin, or acarbose. Blood glucose, oral glucose tolerance test, insulin tolerance test, pancreatic histopathology and serum biochemistry were detected to assess the hypoglycemic effect of HDB. Results HDB treatments were found to show the effect in reducing glucose levels. HDB also resulted in a significant reduction in body weight and food intake in the STZ-induced diabetic mouse model. Furthermore, it significantly improved glucose and insulin tolerance in the two diabetic mouse models. Importantly, insulin, glucagon, pancreatic polypeptide, and somatostatin immunohistochemistry revealed that HDB treatment improved the function and the location of the cells in the islets compared with the other two treatments. HDB treatment resulted in significant restoration of islet function. Our results illustrated the underlying mechanism of HDB in the progression of diabetes, and HDB can be an effective agent for the treatment of diabetes. Conclusion The results of this study suggested that HDB can reduce blood glucose levels in STZ-induced hyperglycemic mice and db/db mice.