The present study is aimed at finding the influence of silymarin (a flavonoid) (25 mg/kg & 50 mg/kg) in streptozotocin (STZ)-induced diabetic rats. Type 2 diabetes was induced by single intraperitoneal injection of STZ (100 mg/kg) to 3 days old rat pups. Silymarin was administered for 15 days after the animals were confirmed diabetic (75 days after STZ injection). Blood glucose, glycosylated hemoglobin ($HbA_{1c}$), lipid peroxides (LPO) levels and reduced glutathione (GSH) contents in pancreas and liver were estimated following the established procedures. Biochemical observations were further substantiated with histological examination of pancreas. Blood glucose and $HbA_{1c}$ levels, which were elevated by STZ, were lowered to physiological levels by the administration of silymarin. The levels of LPO were significantly increased in STZ-induced diabetic rats. Silymarin reduced the LPO levels in both pancreas and liver. GSH contents which were reduced significantly in pancreas and liver of STZ-induced diabetic rats were brought back to near normal levels by silymarin treatment. Multifocal necrotic and degenerative changes of pancreas in STZ-diabetic rats were minimized to near normal morphology by administration of silymarin as evident by histopathological examination. Silymarin showed a dose dependent protective effect on STZ-induced $eta$-cell damage. It could be attributed to the antioxidative and free radicals scavenging properties of the flavonoid. Thus, it may be considered as a natural antioxidant with potential therapeutic application in the treatment of type 2 diabetes.