The aim of this study was to characterize and evaluate a novel oral insulin nanoparticulate system based on alginate-dextran sulfate core, complexed with a chitosan-polyethylene glycol-albumin shell. Insulin-loaded nanospheres (25, 50, 100 IU/kg) administered orally to diabetic rats reduced glycemia in a dose dependent manner. This effect lasted over 24 h with a maximal effect after 14 h. Nanospheres increased insulin plasma level and improved glycemic response to an oral glucose overload. After 4 days oral administration (50 IU/kg/day), the metabolic status of diabetic rats improved with a reduction in water intake, urine excretion and proteinuria. FITC-insulin-loaded nanospheres administered to an isolated intestinal loop were taken up by the intestinal mucosa. They strongly adhered to villus apical enterocytes and markedly labeled Peyer's patches. It is concluded that nanospheres preserve insulin and exert an antidiabetic effect after oral administration. This is explained by a protective effect against proteolytic enzymes by the albumin coating, by the mucoadhesive properties of chitosan-polyethylene glycol, and by the possibility of chitosan reversibly altering tight junctions leading to an improved absorption of insulin. This formulation demonstrates beneficial effects on diabetic symptoms and will be of interest in the treatment of diabetes with oral insulin.