Pleurotus citrinopileatus is an edible mushroom, which has recently become very popular, with a consequent increase in industrial production. Water-soluble polysaccharides (WSPS), extracted from edible mushrooms, have been found to have antitumor and immunoenhancing effects. In this study, we investigate the effects of WSPS extracted from submerged fermented medium of P. citrinopileatus on hyperglycemia and damaged pancreatic cells in rats with streptozotocin (STZ)-induced diabetes. The diabetic rats fed with water-soluble polysaccharide of P. citrinopileatus (SPPC) lost less body weight than those fed SPPC-free regular diet. Serum total cholesterol and triglyceride levels in the diabetic rats fed with SPPC at a dose of 0.4 g/kg bw daily was lower than in the groups fed with SPPC at doses of 0.04 and 0.12 g/kg bw. The fasting blood glucose levels of diabetic rats fed with SPPC were 44% lower than the negative controls. The degree of damage to the islets of Langerhans of the rats fed with the highest dosage of SPPC was significantly lower than those fed with SPPC at doses of 0.04 and 0.12 g/kg bw. The results showed that STZ-induced diabetic rats fed with SPPC might help alleviate the elevation of the level of that in fasting blood glucose.