Recently, we have published a pioneering work on green biosynthesis and complete characterization of gold and core shell silver-gold nanoparticles (AuNPs and Ag@AuNPs). Herein, the so obtained nanoparticles are assessed for their antidiabetic activity in streptozotocin-induced diabetic rats. Thus, sixty-four male albino rats were divided into eight groups: control untreated; diabetic rats; diabetic rats received standard drug; diabetic rats received carrier only; diabetic rats received 0.5 ml AuNPs; diabetic rats received 1 ml AuNPs; diabetic rats received 0.5 ml Ag@AuNPs and diabetic rats received 1 ml Ag@AuNPs for twenty-one days. Results revealed that diabetic rats treated with AuNPs or Ag@AuNPs restored normal glucose level. In particular, Ag@AuNPs was found to significantly induce a reduction in blood glucose and restore both the high serum insulin level and glucokinase activity compared to the control normal rats. The results obtained disclose the effectual role of Ag@AuNPs in reducing the lipid profile, an anti-inflammatory effect in diabetic rats assessed using inflammatory markers IL-α and C-reactive protein (CRP). Histopathological examination of diabetic rats signifies distortion in the arrangement of cells around the central vein, inflammatory cells, pyknotic and apoptotic nuclei. Kidney of diabetic rat appears with vacuolation and pyknotic nuclei of some tubules. On the other hand, the liver of diabetic rat treated with Ag@AuNPs displayed normal hepatic cells with only few necrosis of hepatocytes. Ag@AuNPs restored the increased number of caspase-3 stained cells in the liver and kidney tissue in diabetic rats. In conclusion, Ag@AuNPs was observed to improve diabetic condition by limiting prolonged inflammation, suppressing oxidative stress and elevating the antioxidant defense system in diabetic rats which subsequently evoke the potential impact of AuNPs as a cost effective therapeutic cure in diabetic treatments and its complications.