Rehmannia glutinosa (Gaertn.) DC. (RG) has been widely used as traditional Chinese herbal medicine for treatment of diabetes and its complications. The polysaccharide fraction of RG has been proposed to possess hypoglycemic effect by intraperitoneal administration, however, the mechanisms responsible for the hypoglycemic effect of RG polysaccharide (RGP) remain poorly understood. Here we studied the anti-hyperglycemic and anti-hyperlipidemic effect of oral administration of a purified RGP and its underlying mechanisms in streptozotocin (STZ)-induced diabetic mice. The preliminary structure of RGP was determined by GC and FT-IR. Mice were injected with STZ to induce type 1 diabetes. RGP at doses of 20, 40 and 80 mg/kg/day was orally administered to mice for 4 weeks, and metformin was used as positive control. After 4 weeks, the blood biochemical parameters, the pancreatic insulin contents, in vitro insulin secretion, the hepatic glycogen contents and mRNA expression of phosphoenolpyruvate carboxyl kinase (PEPCK) were assayed. RGP was composed of rhamnose, arabinose, mannose, glucose and galactose in the molar ratio of 1.00:1.26:0.73:16.45:30.40 with the average molecular weight of 63.5 kDa. RGP administration significantly decreased the blood levels of glucose, total cholesterol, triglycerides, low density lipoprotein-cholesterol, and increased the blood levels of high density lipoprotein-cholesterol and insulin in diabetic mice, concurrent with increases in body weights and pancreatic insulin contents. The in vitro study revealed that RGP significantly enhanced both basal and glucose-stimulated insulin secretions, as well as islet insulin contents in the pancreatic islets of diabetic mice. Moreover, RGP reversed the increased mRNA expression of PEPCK and the reduced glycogen contents in the liver of diabetic mice. Furthermore, RGP exhibited potent anti-inflammatory and anti-oxidative activities, as evidenced by the decreased blood levels of TNF-α, IL-6, monocyte chemoattractant protein-1, MDA, and also the elevated blood levels of SOD and GPx activities in diabetic mice. Taken together, RGP can effectively ameliorate hyperglycemia, hyperlipemia, vascular inflammation and oxidative stress in STZ-induced diabetic mice, and thus may be a potential therapeutic option for type 1 diabetes.