Diabetes mellitus is a metabolic disorder that affects millions of people worldwide. Present study highlights the antidiabetogenic property of Linum usitassimum active fraction (LU6) in streptozotocin (STZ) induced diabetic Swiss mice. Treatment with LU6 fraction showed improved glucose utilization with increase in liver glucose-6-phosphate dehydrogenase enzyme activity and normal glycogenesis in hepatic and muscle tissues. Reduction in pancreatic and intestinal glucosidase inhibitory activity was observed with LU6 treatment, indicating beneficial effects in reducing postprandial hyperglycemia (PPHG). Normalization of plasma insulin and C-peptide levels were observed in diabetic mice, indicating endogenous insulin secretion after the treatment with LU6. The histochemical and immunohistochemical analysis on pancreatic islets suggests the role of LU6 fraction in islet regeneration and insulin secretion as evident in increase functional pancreatic islets producing insulin. Furthermore, significant insulin producing islet formation was also observed in in vitro PANC-1 cells after LU6 treatment, indicating the cellular aggregates to be newly formed islets. This suggests the potential of LU6 fraction in the formation of new islets in vitro, as well as in vivo. Thus, LU6 can be used as a neutraceutical-based first-line treatment for diabetes.