We evaluated the antidiabetic and antioxidant activity of Dodonaea viscosa in streptozotocin-induced diabetic rats. The water extract (DVW) and polar fraction of ethanol extract (DVE-4) in a single-dose one-day study showed dose-dependent reduction in glucose levels with maximum effect of 42.16% and 72.9% respectively at 6 h post drug treatment (p<0.001). DVE-4 was more active than DVW and glibenclamide. In a multi-dose fifteen-day study, lower doses of DVW (400 mg/kg) and DVE-4 (200 mg/kg) exhibited higher percentage reduction in glucose levels compared to glibenclamide treated group. Altered levels of lipids, TBARS, non-enzymatic and enzymatic antioxidants were restored by DVW (400 mg/kg) and DVE-4 (200 mg/kg) in diabetic rats. In vitro steady state and time resolved studies reveled that DVW and DVE-4 showed comparable antioxidant ability in steady state and kinetic studies suggesting its possible role in observed antidiabetic and hypolipidaemic activities.