Aegle marmelos Corr. (Rutaceae) is widely used in Indian Ayurvedic medicine for the treatment of diabetes mellitus. The aqueous extract of Aegle marmelos seeds was administered orally at different doses (100, 250 and 500 mg/kg) to normal as well as sub (fasting blood glucose (FBG) normal; glucose tolerance abnormal) and mild (FBG 120-250 mg/dl) diabetic rats. The dose of 250 mg/kg was found to be most effective dose and it decreases blood glucose level (BGL) by 35.1% in normal healthy rats after 6h of administration. The same dose also showed a marked reduction in BGL of 41.2% in sub and 33.2% in mild diabetic rats in glucose tolerance test (GTT) after 2 h. Treatment of severely (FBG >250 mg/dl) diabetic rats for 14 days with a dose of 250 mg/kg reduces the fasting blood glucose by 60.84% and urine sugar by 75% than their pretreatment levels. It brought about fall in level of total cholesterol (TC) by 25.49% with increase of 33.43% in high density lipoprotein (HDL) and decrease of 53.97 and 45.77% in low density lipoprotein (LDL) and triglyceride (TG), respectively. These results clearly indicate that aqueous seed extract of Aegle marmelos possess antidiabetic and hypolipidemic effects in diabetic rats.