The water extraction and composition of pu-erh tea, as well as the hypoglycemic effect of the water extract of pu-erh tea (WEPT) in vivo and in vitro, are reported to investigate its hypoglycemic effect on diabetes. High-performance liquid chromatography and colorimetric methods are used to analyze the tea catechins, caffeine, polyphenols, amino acids, and polysaccharides of the WEPT. The effect of the WEPT on glucose uptake by cultured HepG2 cells and the inhibition effect of rat intestinal sucrase, maltase, and porcine pancreatic amylase are determined in vitro. Then, the blood glucose and insulin levels of intragastrically administered WEPT on fasting and oral glucose tolerance test (OGTT) using type 2 diabetic db/db (BKS.Cg-m +/+ Lepr(db)/J) mice are determined in vivo. The results showed that the WEPT dose-dependently and significantly increased glucose uptake by HepG2 cells and inhibited rat intestinal sucrase, maltase, and porcine pancreatic amylase activity. The WEPT intragastrically given for 4 weeks suppressed the increase in blood insulin and glucose levels of db/db mice fasted overnight. In OGTT, the WEPT improved impaired glucose tolerance and ameliorated retarded insulin response at 60 and 120 min in db/db mice. These results suggest that the WEPT has beneficial effects on glucose homeostasis in type 2 diabetes and in amendment of insulin resistance.