Background: Jia-Wei-Jiao-Tai-Wan (JWJTW), composed of Jiao-Tai-Wan (Cinnamomum cassia and Rhizoma coptidis) and other antidiabetic herbs, including Astragalus membranaceus, Herba Gynostemmatis, Radix Puerariae Lobatae, Folium Mori and Semen Trigonellae, is widely used to treat diabetes and has demonstrated a curative effect in the clinic, but the potential mechanism is unknown. This study aimed to explore the effects of JWJTW on diabetic rats and to clarify the underlying mechanism. Methods: JWJTW was prepared, and the main components contained in the formula were identified by high-performance liquid chromatography (HPLC) fingerprint analysis. Diabetic rats induced by streptozotocin (STZ) and a high-sucrose-high-fat diet were treated with two concentrations of JWJTW (1.025 and 2.05 g/kg/d) for 100 days. The oral glucose tolerance test (OGTT), insulin release test (IRT) and insulin tolerance test (ITT) were performed to measure the glycometabolism of the diabetic rats at the end of the treatment period. Blood was collected to determine the serum lipid levels of the diabetic rats. Nitric oxide (NO), malondialdehyde (MDA), superoxide dismutase (SOD) and glutathione peroxidase (GSH-px) were detected in pancreas homogenates to analyze the oxidative stress in the pancreata of diabetic rats, and the expression levels of pancreatic and duodenal homeobox 1 (PDX-1) and insulin in the pancreas were tested by Western blot to measure pancreatic islet function. In addition, Western blots were used to measure the expression of proteins related to the insulin signaling pathway in skeletal muscle of the diabetic rats. Results: The results showed that the administration of JWJTW could ameliorate impairments in glucose tolerance, insulin release function and insulin tolerance in diabetic rats. JWJTW could also dose-dependently reduce serum lipid levels in diabetic rats. JWJTW restrained oxidative stress by decreasing the expression of NO and MDA and increasing the expression of SOD and GSH-px. JWJTW improved the function of pancreatic beta cells by increasing PDX-1 and insulin expression. In addition, JWJTW restored the impaired insulin signaling; upregulated phospho-insulin receptor (pInsR) expression, insulin receptor substrate (IRS) tyrosine phosphorylation, phosphatidylinositol 3-kinase (PI3K) (p85), and glucose transporter 4 (GLUT4) expression; and downregulated the serine phosphorylation of IRS. Conclusions: This study suggests that JWJTW can ameliorate type 2 diabetes by improving beta cell function and reducing insulin resistance in diabetic rats.