We previously reported that long-term treatment with a calcineurin inhibitor impairs autophagy process in pancreatic beta cells. This study investigated the effect of Korean red ginseng extract (KRGE) on autophagy modulated by oxidative stress. In mice with tacrolimus (Tac)-induced diabetes mellitus, KRGE alleviated islet dysfunction and decreased oxidative stress and autophagic vacuoles. In vitro, KRGE decreased autophagosome formation and attenuated lysosomal degradation, accompanied by improved beta cell viability and insulin secretion. Addition of 3-methyladenine (3-MA), an inhibitor of autophagosomes, to KRGE further improved cell viability and insulin secretion, and bafilomycin A (BA), an inhibitor of lysosomal function, reduced the effects of KRGE. At the subcellular level, Tac caused mitochondrial dysfunction (impaired mitochondrial oxygen consumption, ATP production, and increased reactive oxygen species production). But KRGE improved these parameters. The effect of KRGE on mitochondrial function enhanced by 3-MA but decreased by BA, suggesting a causal relationship between KRGE effect and autophagy modulation in Tac-induced mitochondrial dysfunction. These findings indicate that KRGE modulates autophagy favorably by reducing Tac-induced oxidative stress, and this effect is closely associated with improvement of mitochondrial function.