Andrographis paniculata (Burm.f.) Nees (Acanthaceae) (AP), containing the major active principle, andrographolide, (AG) has been used ethnomedically in the treatment of diabetes and hypertension in Malaysia and India. Type 2 diabetes mellitus was induced by administering nicotinamide (NA) 180 mg/kg i.p., followed by streptozotocin (STZ) 45 mg/kg i.p., 15 min later and allowed for 15 days to develop. Diabetic rats treated with active principle andrographolide 10 mg/kg and ethanol extract of Andrographis paniculata at doses of 500 and 1000 mg/kg, p.o, for 21 days, caused a significant reduction in fasting serum glucose levels on all days analysed (P < 0.01). Treatment with andrographolide and extract showed an increase in glucokinase (GK; P < 0.05), hexokinase (HK; P < 0.05), and lactate dehydrogenase (LDH; P < 0.05) enzyme levels respectively. Significant reductions were observed in serum cholesterol (P < 0.05), triglycerides (P < 0.05), free fatty acids (P < 0.05), and liver glucose 6-phosphatase (G6P'Tase; P < 0.05) enzyme levels on treatment with andrographolide and extract. Glucose 6-phosphate dehydrogenase (G6PDH; P < 0.05) level also showed a significant increase on treatment with andrographolide and extract. Liver antioxidant status (P < 0.05) also improved significantly on treatment with andrographolide and extract. However, no significant increase in serum insulin was found on treatment with either andrographolide or extract, suggesting an effective extra pancreatic mechanism. Thus, the present study demonstrates that andrographolide at 10 mg/kg, and ethanol extract of Andrographis paniculata at 500 and 1000 mg/kg, p.o., on treatment for 21 days, exhibited antidiabetic, hypolipidemic, and antioxidant activities in an adult streptozotocin-nicotinamide type 2 diabetes mellitus model. The results support the traditional use of Andrographis paniculata in the treatment of type 2 diabetes mellitus, and its associated plethora of complications.