In the present study, the effect of alcoholic stem extract of Gymnema montanum (GMSt) on blood glucose, plasma insulin, and carbohydrate metabolic enzymes were studied in experimental diabetes. Diabetes mellitus was induced by a single intraperitoneal injection of STZ (60 mg/kg bw). Five days after STZ induction, diabetic rats received GMSt orally at the doses of 25, 50, 100 and 200mg/kg daily for 3 weeks. Graded doses of stem extract showed a significant reduction in blood glucose levels and improvement in plasma insulin levels. The effect was more pronounced in 100 and 200mg/kg than 50mg/kg. GMSt showed significant increase in hexokinase, Glucose-6-phosphate dehydrogenase and glycogen content in liver of diabetic rats while there was significant reduction in the levels of glucose-6-phosphatase and fructose-1,6-bisphosphatase. The present study clearly indicated significant antidiabetic effect with the stem extract of G. montanum and lends support for its traditional usage.