Aerva lanata (L.) Juss. ex Schultes commonly known as 'Sunny khur' is widely used in Indian folk medicine for the treatment of Diabetes mellitus. This study was undertaken to evaluate the effect of an alcoholic extract of A. lanata (AAL) on blood glucose and other biochemical parameters in alloxan-induced diabetic rats. AAL was found to reduce the increase of blood sugar in alloxan-induced diabetic rats (42% at 375 mg/kg and 48% at 500 mg/kg body weight). Chronic administration of AAL significantly (P<0.001) reduced the blood sugar of alloxan induced diabetic rats for 2 weeks. Also the extract prevented a decrease in body weight and reduced the increased lipid peroxides in alloxan induced diabetic rats. These results suggest that the AAL posseses anti-diabetic activity and is able to ameliorate biochemical damages in alloxan induced diabetic rats.