Objective: To establish the effect of Cinnamomum tamala leaves extract on diabetes and diabetes induced dyslipidemia in streptozotocin-induced diabetic rats. Materials and Methods: Diabetes was induced by a single intravenous injection of streptozotocin (50 mg/kg body weight). Group I and II were kept as control and diabetic control respectively. And group III was further treated with ethanolic leaf extract of C. tamala (200 mg/kg body weight, orally) for a period of 40 days. Oral glucose tolerance test was performed before starting the experiment and blood glucose level was estimated. Statistical analysis was performed using one-way Analysis of Variance (using Statistical Package for the Social Sciences [SPSS] version 10.0) and student's ‘t’- test (Sigma Plot version 8.0). The values of P < 0.05 were considered as statistically significant. Results: Treatment of diabetic animals with Cinnamomum tamala extract significantly lowered the blood glucose level, and maintained body weight and lipid-profile parameters towards near normal range. Conclusion: The extract exhibited antidiabetic and antidyslipidemic effect. Further, chemical and pharmacological investigations are required to elucidate the exact mechanism of action of this extract and to isolate the active principles responsible for these effects.