Present study was designed to evaluate the hypoglycemic effect and antioxidant potential of polyherbal formulation in streptozotocin (STZ) induced diabetic rats. Five different groups were made including 10 rats in each group. An aqueous suspension of herbal mixture containing 5 ingredients of equal amounts– leaves of Azadirachta indica (Margosa), leaves of Gymnema sylvestre (Gurmar), fruits of Momordica charantia (Bitter gourd), seeds of Syzigium cumini (Black plum) and seeds of Trigonella foenum (Fenugreek) was administered orally once a day at a dose of 500 mg/kg body weight for a period of 4 weeks. In these groups lipid peroxidation (LPO), reduced glutathione (GSH) , glutathione S -transferase (GST), proteins, urea & cholesterol was estimated in liver and kidney as bioindicators of oxidative stress. The antidiabetic effect of herbal formulation was compared with antidiabetic drug ‘Glibenclamide’. Our observations showed that herbal treatment restored the elevated blood glucose level to normal range in diabetic rats. The formulation also prevented the diabetes-induced decrease in the body weight of rats. Results showed an increased level of GSH and GST and significant decline in LPO with herbal treatment in the tissues of normal and diabetic animals, while no significant change was observed in GSH & GST level with glibenclamide treated diabetic group. Level of serum urea increased to almost two fold in diabetic rats as compared with the values observed in the control group. The urea level restored to normal range in diabetic rats after receiving the herbal mixture. Serum cholesterol was significantly lower in diabetic rats as compared to control. The combination of these five herbal drugs appeared more effective in low dose as an antidiabetic and antioxidant agent than the individual herbal drug, when used alone. This herbal formulation also appeared to be devoid of any significant toxic effect in animals.