Protein tyrosine phosphatase 1B (PTP1B) is implicated in the negative regulation of the insulin signalling pathway by dephosphorylating the insulin receptor (IR) and IR substrates. Ganoderma lucidum has traditionally been used for the treatment of diabetes in Chinese medicine; however, its anti-diabetic potency and mechanism in vivo is still unclear. Our previously published study reported a novel proteoglycan PTP1B inhibitor, named Fudan-Yueyang-Ganoderma lucidum (FYGL) from G. lucidum, with a half-maximal inhibitory concentration (IC₅₀) value of 5·12 (sem 0·05) μg/ml, a protein:polyglycan ratio of 17:77 and 78 % glucose in polysaccharide, and dominant amino acid residues of aspartic acid, glycine, glutamic acid, alanine, serine and threonine in protein. FYGL is capable of decreasing plasma glucose in streptozotocin-induced diabetic mice with a high safety of median lethal dose (LD₅₀) of 6 g/kg. In the present study, C57BL/6 db/db diabetic mice were trialed further using FYGL as well as metformin for comparison. Oral treatment with FYGL in db/db diabetic mice for 4 weeks significantly (P < 0·01 or 0·05) decreased the fasting plasma glucose level, serum insulin concentration and the homeostasis model assessment of insulin resistance. FYGL also controlled the biochemistry indices relative to type 2 diabetes-accompanied lipidaemic disorders. Pharmacology research suggests that FYGL decreases the plasma glucose level by the mechanism of inhibiting PTP1B expression and activity, consequently, regulating the tyrosine phosphorylation level of the IR β-subunit and the level of hepatic glycogen, thus resulting in the improvement of insulin sensitivity. Therefore, FYGL is promising as an insulin sensitiser for the therapy of type 2 diabetes and accompanied dyslipidaemia.