The present study investigated the effect of silymarin, a flavonoid, on streptozotocin (STZ) - induced diabetic dyslipidaemia in rats. Experimental diabetes was induced by a single intraperitoneal injection of STZ (60 mg/kg). Silymarin (25 mg/kg and 50 mg/kg) was orally administered to diabetic rats for a period of 15 days. Blood glucose levels, serum lipid profile and liver glycogen levels were estimated following the established procedures. Biochemical observations were supplemented with histological examination of liver sections. Oral administration of silymarin to diabetic rats significantly (P < 0.001) decreased the blood glucose levels ($259.99{pm}23.64$ vs. $99.90{pm}2.62$ [25 mg] & $89.17{pm}3.32$ [50 mg]). The most interesting finding was the significant (p < 0.001) increase in HDL-cholesterol levels ($26.99{pm}0.61$ vs. $40.55{pm}0.52$ [25 mg] & $41.12{pm}0.37$ [50 mg]) whereas, there was a significant decrease in serum total cholesterol (TCh), triglycerides (TG), low density lipoprotein (LDL) and very low density lipoprotein (VLDL) cholesterol levels observed in silymarin treated diabetic rats. STZ treatment caused significant degeneration of liver parenchyma, which was normalized to near normal morphology by administration of silymarin. The findings indicate that silymarin effectively improved the overall lipid profile and restored the glycogen stores in the liver of STZ-induced diabetic rats, in a dose dependent manner. The results indicate existence of abnormalities in lipid metabolism in STZ-induced diabetic rats and suggest a protective effect of silymarin in this animal model.