Metformin is a biguanide class of drugs and has been recommended as first-line therapy for type 2 diabetes. It has a good safety profile, efficacy, comparatively reduced cost, and potential cardiovascular benefits. Metformin is an insulin-sensitizing agent, its bioavailability is 50%-60%. Generally, A1C levels are lowered by 1.5% points by metformin monotherapy. Treatment with metformin decreases fasting plasma glucose concentrations by 25% to 30% and decreases the production of glucose. Metformin reduces hepatic glucose production and absorption of glucose in the intestine. In addition to it, decreases fatty acids oxidation. In liver and skeletal muscles the mitochondrial function and AMP Activated Protein Kinase (AMPK) activity are considered as potential mechanisms and has gained much attention by which metformin exerts its advantageous effects. In the gut enteroendocrine cells secret glucagon-like peptide-1 and glucose-dependent insulinotropic peptide, which are considered as important determinants for the disposal of glucose following a meal. Glucose production is reduced either by decreasing gluconeogenesis or by glycogenolysis. Treatment with metformin is, nevertheless, very often associated with gastrointestinal side effects and quality of life and treatment adherence is negatively affected in patients of type 2 diabetes. The most common gastrointestinal symptoms are diarrhea, heartburn, and nausea, followed by abdominal pain, bloating, and retching. The mechanism lying under gastrointestinal intolerance caused by metformin is unclear. However, there are different hypothesis proposed, including stimulation of intestinal secretion of serotonin, alteration in incretin and metabolism of glucose, and malabsorption of bile salts. Metformin is used clinically in diabetes, polycystic ovary syndrome, and in obese for weight reduction. It has cardioprotective effect and its use is recently being studied in cancer and HIV associated metabolic abnormalities.