Sequoyitol decreases blood glucose, improves glucose intolerance, and enhances insulin signaling in ob/ob mice. The aim of this study was to investigate the effects of sequoyitol on diabetic nephropathy in rats with type 2 diabetes mellitus and the mechanism of action. Diabetic rats, induced with a high-fat diet and a low dose of streptozotocin, and were administered sequoyitol (12.5, 25.0, and 50.0 mg·(kg body mass)(-1)·d(-1)) for 6 weeks. The levels of fasting blood glucose (FBG), serum insulin, blood urea nitrogen (BUN), and serum creatinine (SCr) were measured. The expression levels of p22(phox), p47(phox), NF-κB, and TGF-β1 were measured using immunohistochemisty, real-time PCR, and (or) Western blot. The total antioxidative capacity (T-AOC), as well as the levels of malondialdehyde (MDA) and reactive oxygen species (ROS) were also determined. The results showed that sequoyitol significantly decreased FBG, BUN, and SCr levels, and increased the insulin levels in diabetic rats. The level of T-AOC was significantly increased, while ROS and MDA levels and the expression of p22(phox), p47(phox), NF-κB, and TGF-β1 were decreased with sequoyitol treatment both in vivo and in vitro. These results suggested that sequoyitol ameliorates the progression of diabetic nephropathy in rats, as induced by a high-fat diet and a low dose of streptozotocin, through its glucose-lowering effects, antioxidant activity, and regulation of TGF-β1 expression.