Cassia auriculata traditionally has been used to treat diabetes from ancient times. The objective of the present study was to investigate the mechanism of action for the antidiabetic activity of aqueous leaf extract of C. auriculata (CLEt) in streptozotocin-induced mildly diabetic (MD) and severely diabetic (SD) rats. CLEt was orally administered to MD and SD rats at a dose of 400 mg/kg once a day for 15 days. CLEt-treated MD and SD rats showed significant reduction in fasting blood glucose. Assessment of plasma insulin and C-peptide following treatment with CLEt revealed significant elevation in their levels. Administration of CLEt enhanced the activity of hepatic hexokinase and phosphofructokinase and suppressed glucose-6-phosphatase and fructose-1,6-bisphosphatase in both MD and SD rats. A significant rise in glycogen content was also observed in both liver and muscles of CLEt-fed MD and SD rats. Histopathological examination of pancreatic sections revealed increased number of islets and ${eta}$-cells in CLEt-treated MD as well as SD rats. The findings of the study suggest that the antidiabetic effect of CLEt could be due to its insulinogenic action. In addition, impaired glucose homeostasis was improved by feeding the extract through amelioration in the carbohydrate metabolic pathways. Thus, the extract may exert an antidiabetic effect through pancreatic as well as extrapancreatic action.