Tamarindus indica Linn. has been in use for a long time in Asian food and traditional medicine for different diseases including diabetes and obesity. However, the molecular mechanisms of these effects have not been fully understood. In view of the multidimensional activity of tamarind seeds due to their having high levels of polyphenols and flavonoids, we hypothesized that the insulin mimetic effect of aqueous tamarind seed extract (TSE) might increase glucose uptake through improvement in the expression of genes of the glucose transporter (GLUT) family and sterol regulatory element-binding proteins (SREBP) 1c messenger RNA (mRNA) in the liver. Daily oral administration of TSE to streptozotocin (STZ)–induced (90 mg/kg intraperitoneally) type 2 diabetic male Wistar rats at different doses (120 and 240 mg/kg body weight) for 4 weeks showed positive correlation with intracellular calcium and insulin release in isolated islets of Langerhans. Tamarind seed extract supplementation significantly improved the GLUT-2 protein and SREBP-1c mRNA expression in the liver and GLUT-4 protein and mRNA expression in the skeletal muscles of diabetic rats. The elevated levels of serum nitric oxide (NO), glycosylated hemoglobin level (hemoglobin A1c) and tumor necrosis factor α (TNF-α) decreased after TSE administration. Immunohistochemical findings revealed that TSE abrogated STZ-induced apoptosis and increased β-cell neogenesis, indicating its effect on islets and β-cell mass. In conclusion, it was found that the antidiabetic effect of TSE on STZ-induced diabetes resulted from complex mechanisms of β-cell neogenesis, calcium handling, GLUT-2, GLUT-4, and SREBP-1c. These findings show the scope for formulating a new herbal drug for diabetes therapy.