Ginseng has been reported to ameliorate hyperglycemia in experimental and clinical studies; however, its mechanism of action remains unclear. In this study, we investigated the metabolic effects and putative molecular mechanisms of Korean red ginseng (KRG, Panax ginseng) in animal models for type 2 diabetes mellitus (T2DM) and peripheral insulin-responsive cell lines. Korean red ginseng was administered orally at a dose of 200 mg/(kg d) to Otsuka Long-Evans Tokushima fatty rats for 40 weeks. Initially, chronic administration of KRG reduced weight gain and visceral fat mass in the early period without altering food intake. The KRG-treated Otsuka Long-Evans Tokushima fatty rats showed improved insulin sensitivity and significantly preserved glucose tolerance compared with untreated control animals up to 50 weeks of age, implying that KRG attenuated the development of overt diabetes. KRG promoted fatty acid oxidation by the activation of adenosine monophosphate-activated protein kinase (AMPK) and phosphorylation of acetyl-coenzyme A carboxylase in skeletal muscle and cultured C2C12 muscle cells. Increased expression of peroxisome proliferator-activated receptor-gamma coactivator-1alpha, nuclear respiratory factor-1, cytochrome c, cytochrome c oxidase-4, and glucose transporter 4 by KRG treatment indicates that activated AMPK also enhanced mitochondrial biogenesis and glucose utilization in skeletal muscle. Although these findings suggest that KRG is likely to have beneficial effects on the amelioration of insulin resistance and the prevention of T2DM through the activation of AMPK, further clinical studies are required to evaluate the use of KRG as a supplementary agent for T2DM.