Anemarrhena asphodeloides is an herb widely used to treat symptoms associated with diabetes in traditional Chinese medicine. However, its key components and metabolites have low bioavailability and poor host absorption. To clarify the anti-diabetic mechanism of A. asphodeloides extract (AAE), we examined the anti-diabetic effects of AAE in rats with diabetes induced by a high-fat diet and streptozotocin. Faeces levels of the main components and metabolites of AAE were significantly higher than levels in plasma, which indicated that gut microbiota might play important roles in its anti-diabetic effect. Microbiological studies showed that unabsorbed components increased the diversity of the gut microbiota, enriched potentially beneficial bacteria, and suppressed potentially harmful bacteria. In vitro studies showed that AAE promoted the proliferation of Blautia coccoides, a bacterium with positive implication for diabetes, in a dose-dependent manner. AAE also promoted pancreatic cell regeneration and restored the function of pancreatic islet cells via peroxiredoxin 4 overexpression. Overall, these results suggest that AAE alleviates diabetes via modulating gut microbiota and protein expression.