Our previous studies found that Astragalus polysaccharide (APS) exerts insulin-sensitizing and hypoglycemic activities in type 2 diabetic (T2DM) rats. The present study was designed to further confirm the hypoglycemic effect of APS and to investigate its possible mechanism underlying the improvement of insulin resistance in vivo and in vitro. Diet-induced insulin resistant C57BL/6J mice treated with or without APS (orally, 700 mg/kg/d) for 8 weeks were analyzed and compared. Simultaneously, an insulin resistant C(2)C(12) cell model and an ER stressed HepG2 cell model were established and incubated with or without APS (200 microg/ml) for 24h respectively. Systematic insulin sensitivity was measured with an insulin-tolerance test (ITT) and an homeostasis model assessment (HOMA IR) index. Metabolic stress variation was analyzed for biochemical parameters and pathological variations. The expression and activity of protein tyrosine phosphatase 1B (PTP1B), which plays a very important role in insulin signaling and in the ER stress response, was measured by immunoprecipitation and Western blot. The ER stress response was analyzed through XBP1 transcription and splicing by real-time PCR. APS could alleviate insulin resistance and ER stress induced by high glucose in vivo and in vitro, respectively. The hyperglycemia, hypolipemia, and hyperinsulinemia status were controlled with APS therapy. Insulin action in the liver of insulin resistant mice was restored significantly with APS administration. APS enhanced adaptive capacity of the ER and promoted insulin signaling by the inhibition of the expression and activity of PTP1B. Furthermore, the anti-obesity effect and hypolipidemia effects of APS were probably due partly to decreasing the leptin resistance of mice, which would positively couple with the normalization of plasma insulin levels. We have shown that APS has beneficial effects on insulin resistance and hyperglycemia. The mechanism is related to the alleviation of ER stress and insulin resistance under hyperglycemia conditions.