Diabetes, a metabolic disease stemming from impaired or defective insulin secretion, ranks among the most severe chronic illnesses globally. While several approved drugs exist for its treatment, they often come with multiple side effects. Therefore, there is a pressing need for safe and effective anti-diabetic medications. Traditional Chinese medicine has recognized Lycium barbarum (LB; goji berry) plant, commonly known as "wolfberry fruit" in China, for over 2,000 years. Natural compounds derived from LB show promise in reducing diabetes levels. Although research on the impact of LB on diabetes is still limited, our review aims to explore the potential of LB in reducing the risk of diabetes and examine the underlying mechanisms involved. LB can modulate diabetes through various pathways, such as inhibiting α-amylase and α-glucosidase activities, promoting β-cell proliferation, stimulating insulin secretion, inhibiting glucagon secretion, improving insulin resistance and glucose tolerance, and enhancing antioxidant and anti-inflammatory activities. Additionally, LB improves gut flora and immunomodulation, further aiding diabetes management. These findings highlight the potential clinical utility of LB in managing diabetes and its complications within the framework of evidence-based modern medicine.