Psidium guajava Linn. (family Myrtaceae; PG) is a tropical fruit with a blood-glucose-lowering effect in diabetic rats, but its mechanism of action is still unknown. We investigated the antihyperglycemic efficacy and mechanisms of action of PG in streptozotocin (STZ)-induced diabetic rats. After 4 weeks of PG supplementation (125 and 250 mg/kg), PG significantly restored the loss of body weight caused by STZ and reduced blood glucose levels in a dose-dependent manner compared with that in diabetic control rats. Mechanistically, PG protected pancreatic tissues, including islet β-cells, against lipid peroxidation and DNA strand breaks induced by STZ, and thus reduced the loss of insulin-positive β-cells and insulin secretion. Moreover, PG also markedly inhibited pancreatic nuclear factor-kappa B protein expression induced by STZ and restored the activities of antioxidant enzymes, including superoxide dismutase, catalase, and glutathione peroxidase. We conclude that PG has a significant antihyperglycemic effect, and that this effect is associated with its antioxidative activity.