Cordyceps militaris (CM) has been used as a tonics in the traditional medicine. To investigate the anti-diabetic principle of CM, activity guided fractionation was conducted. Hot water extract of CM was fractionated into 3 parts: above 100,000(A), $100,000{sim}20,000(B)$, below 20,000(C) in molecular weight using in membrane filter system. All fractions showed mild hypoglycemic activity in streptozotocin (STZ)-induced diabetic rats by oral administration (300 mg/kg). The fraction C which was most active among them was fractionated again into two parts, C-1 and C-2 by Sephadex LH 20 column chromatography. The fraction C-1 showed hypoglycemic activity but C-2 did not show activity compared with control in STZ mice. In glucose-fed hyperglycemic mice, fraction C, C-1 and C-2 also showed significant glucose lowering activity. Their decreasing rates of plasma glucose level after 1 hours administrations of fraction C, C-1 and C-2 were 24.5%, 29.3% and 22.0%, respectively (Tolbutamide: 48.4%). These results suggested that CM has both insulin like and insulin release promoting activity and could be developed as an antidiabetic agent.