The objective of this study is to fully investigate the therapeutic effect and mechanisms of action of Gegen Qinlian decoction (GD) on type 2 diabetes mellitus (type 2 DM). A rat model of type 2 DM was established with the combination of high-fat diet and multiple low doses of streptozotocin (STZ). Biochemical indicators related to glucose metabolism disorders, insulin resistance, oxidative stress were observed. The type 2 DM rats were administrated with GD for 80 days, the above-mentioned indexes were detected. The results indicated that the hepatic glycogen synthesis level was promoted, fasting blood glucose level and fasting blood insulin level were significantly reduced, insulin sensitivity index was significantly improved; the level of superoxide dismutase (SOD) was increased and the level of malondialdehyde (MDA) was reduced; pathologic morphology of pancreas and kidney was ameliorated in the GD group. It was indicated that the therapeutic mechanisms of action of GD on type 2 DM might be related to its effect of ameliorating glucose metabolism disorders, relieving insulin resistance, increasing the tissues' sensitivity to insulin, improving the antioxidative ability of living system, GD has therapeutic effect on type 2 DM and protective effects against damaged pancreatic function.