This study was undertaken to evaluate the antihyperglycemic, antilipid peroxidative, and antioxidant effects of the ethanol extracts of Artemisia iwayomogi (Ai) in streptozotocin (STZ)-induced diabetic rats. Diabetes was induced in Sprague-Dawley rats with a single intravenous injection (45 mg/kg b.w.) of STZ. The diabetic rats were then randomized to the diabetic and Ai extract therapy groups which were treated with Ai extract at doses of 1, 2, and 3 g/kg b.w./day, respectively, for 14 days. Oral administration of Ai (2 g/kg b.w.) significantly decreased their intake of food. Dosage of 2 g/kg of the extract significantly decreased blood glucose levels in the glucose level in diabetic rats after 4 day, there was no significant difference observed at 1 and 3 g/kg. A dose of 2 or 3 g/kg of the Ai extract significantly reduced plasma glucose levels in STZ-induced hyperglycemic rats at 7 days. The hypoglycemic effect of Ai at a dose of 2 g/kg was significantly more effective than that of STZ-control. The effect was more pronounced in 2 g/kg than 1 g and 3 g/kg. A significant reduction in triglycerides (TG) and free fatty acids (FFA), and a significant increase in liver glycogen were observed in treated diabetic rats at doses of 2 g/kg after 14 days of treatment. Administration of Ai extracts to diabetic rats showed a significant decrease in liver malondialdehyde (MDA) levels. The activity of superoxide dismutase (SOD) was significantly increased in the 3 g extract-supplemented groups. The activities of glutathione peroxidase (GSH-px) and catalase (CAT) were significantly increased in the 1 g and 3 g extract-supplemented groups. Ai extract significantly increased glutathione-S transferase (GST) activity in a dose-dependent manner compared with treatment in STZ-control rats. Our result supports the fact that the administration of Ai extract is able to reduce hyperglycemia and hyperlipidemia risk, and also reduce the oxidative stress in diabetic rats.