The anti-diabetic potential of Petalonia binghamiae extract (PBE) was evaluated in vivo. Dietary administration of PBE to streptozotocin (STZ)-induced diabetic mice significantly lowered blood glucose levels and improved glucose tolerance. The mode of action by which PBE attenuated diabetes was investigated in vitro using 3T3-L1 cells. PBE treatment stimulated 3T3-L1 adipocyte differentiation as evidenced by increased triglyceride accumulation. At the molecular level, peroxisome proliferator-activated receptor gamma (PPARgamma) and terminal marker protein aP2, as well as the mRNA of GLUT4 were up-regulated by PBE. In mature adipocytes, PBE significantly stimulated the uptake of glucose and the expression of insulin receptor substrate-1 (IRS-1). Furthermore, PBE increased PPARgamma luciferase reporter gene activity in COS-1 cells. Taken together, these results suggest that the in vivo anti-diabetic effect of PBE is mediated by both insulin-like and insulin-sensitizing actions in adipocytes.