A novel glycogen phosphorylase inhibitor FR258900 was isolated from the cultured broth of a fungal strain No. 138354. We examined the hypoglycemic effects of FR258900 in diabetic animal models. FR258900 treatment significantly reduced the plasma glucose concentrations during oral glucose tolerance tests in diabetic mice models, including db/db mice and STZ-induced diabetic mice. Furthermore, FR258900 treatment resulted in rapid decrease in the plasma glucose levels in db/db mice. These improvements in glucose disposal were accompanied by increased liver glycogen contents, suggesting that the glucose lowering effects of FR258900 were attributed to suppressed hepatic glycogen breakdown and increased hepatic glycogen synthesis. Taken together, our results suggest that glycogen phosphorylase is a potentially useful target in new therapies against diabetes.