Type 2 diabetic mellitus (T2DM) is characterized by systemic inflammation and insulin resistance due to obesity, and this leads to critical complications, including retinopathy and nephropathy. This study explored the therapeutic effect of substance-p (SP), a neuropeptide, on T2DM progression and its complications. To examine whether SP affects glucose metabolism, lipid metabolism, systemic inflammation, and retinopathy, Otsuka Long-Evans Tokushima Fatty rats (OLETF, 27 weeks old) with chronic inflammation, obesity, and impaired bone marrow stem cell pool was selected. SP was intravenously injected and its effect was evaluated at 2 and 4 weeks after the SP injection. OLETF had typical symptoms of T2DM, including obesity, chronic inflammation, and poor glycemic control. However, SP treatment inhibited the body-weight gain and reduced circulating levels of free fatty acid, cholesterol, and triglyceride, ameliorating the obese environment. SP could suppress inflammation and rejuvenate bone marrow stem cell in OLETF rats. SP-mediated metabolic/immunological change could resolve hyperglycemia and insulin resistance. Histopathological analysis confirmed that SP treatment alleviated the dysfunction of target tissue with insulin resistance. OLETF rats have retinal damage from 27 weeks of age, which was reliably aggravated at 31 weeks. However, SP treatment could restore the damaged retina, sustaining its structure similarly to that of non-diabetic rats. In conclusion, systemic application of SP is capable contribute to the inhibition of the progression of T2DM and diabetic retinopathy.