Clove (Syzygium aromaticum flower buds) EtOH extract significantly suppressed an increase in blood glucose level in type 2 diabetic KK-A(y) mice. In-vitro evaluation showed the extract had human peroxisome proliferator-activated receptor (PPAR)-γ ligand-binding activity in a GAL4-PPAR-γ chimera assay. Bioassay-guided fractionation of the EtOH extract resulted in the isolation of eight compounds, of which dehydrodieugenol (2) and dehydrodieugenol B (3) had potent PPAR-γ ligand-binding activities, whereas oleanolic acid (4), a major constituent in the EtOH extract, had moderate activity. Furthermore, 2 and 3 were shown to stimulate 3T3-L1 preadipocyte differentiation through PPAR-γ activation. These results indicate that clove has potential as a functional food ingredient for the prevention of type 2 diabetes and that 2-4 mainly contribute to its hypoglycemic effects via PPAR-γ activation.