Lindera obtusiloba is a medicinal herb traditionally used in Asia for improvement of blood circulation, treatment of inflammation, and prevention of liver damage. A previous study has shown that an ethanolic extract of Lindera obtusiloba stems (LOE) has vasoprotective and antihypertensive effects. The possibility that Lindera obtusiloba improves endothelial function and metabolic parameters in type 2 diabetes mellitus (T2DM) remains to be examined. Therefore, the aim of the present study was to determine the potential of LOE to prevent the development of an endothelial dysfunction, and improve metabolic parameters including hyperglycemia, albuminuria and physical exercise capacity in db/db mice, an experimental model of T2DM. The effect of LOE (100 mg/kg/day by gavage for 8 weeks) on these parameters was compared to that of an oral antidiabetic drug, pioglitazone (30 mg/kg/day by gavage). Reduced blood glucose level, body weight and albumin-creatinine ratio were observed in the group receiving LOE compared to the control db/db group. The LOE treatment improved endothelium-dependent relaxations, abolished endothelium-dependent contractions to acetylcholine in the aorta, and normalized the increased vascular oxidative stress and expression of NADPH oxidase, cyclooxygenases, angiotensin II, angiotensin type 1 receptors and peroxynitrite and the decreased expression of endothelial NO synthase in db/db mice. The angiotensin-converting enzyme (ACE) activity was reduced in the LOE group compared to that in the control db/db group. LOE also inhibited the activity of purified ACE, COX-1 and COX-2 in a dose-dependent manner. In addition, LOE improved physical exercise capacity. Thus, the present findings indicate that LOE has a beneficial effect on the vascular system in db/db mice by improving endothelium-dependent relaxations and vascular oxidative stress most likely by normalizing the angiotensin system, and also on metabolic parameters, and these effects are associated with an enhanced physical exercise capacity.