Peganum harmala L. (Zygophyllaceae) is a traditional medicine used for the treatment of variety of human ailments, including antidepression, hallucination, antileishmaniasis etc. We report for first time the hypoglycemic activity of the ethanolic extract of this plant at two dose levels of 150 and 250mg/kg bw in sucrose challenged normal as well as in rats with streptozotocin induced diabetes. The oral administration of ethanolic extract causes maximum fall of blood glucose level to 22.9% (p<0.05) and 29.4% (p<0.01) respectively with the two doses in normal and 30.3% (p<0.01) and 48.4% (p<0.001) in diabetic rats. The standard drug metformin treated group showed 28.0% (p<0.01) and 45.5% (p<0.001) respectively in normal and diabetic rats. The above results show that the ethanolic extract of P. harmala is as effective as metformin in reducing the blood glucose levels of normoglycemic and streptozotocin-induced diabetic rats.