Diabetes is an emerging health problem worldwide. The incidence of type 2 diabetes has dramatically increased and is expected to increase more rapidly in the future. Most patients with type 2 diabetes suffer from obesity and diabetes-related complications, including cardiovascular disease and hepatic steatosis. It has been proposed that simple sugar consumption is one of the major risk factors in the development of diabetes. Hence, the replacement of sugars with a low glycemic response would be an effective strategy to prevent type 2 diabetes. Accumulating evidence demonstrates that D-psicose, which has 70% the sweetness of sucrose and no calories, is a functional sugar exerting several health benefits preventing the development of diabetes. Although D-psicose presents in small amounts in natural products, a recent new technique using biocatalyst sources enables large-scale D-psicose production. More importantly, several clinical and animal studies demonstrated that D-psicose has hypoglycemic, hypolipidemic, and antioxidant activities, which make it an ideal candidate for preventing diabetes and related health concerns. This review will summarize the protective effects of D-psicose against type 2 diabetes and its complications, suggesting its potential benefits as a sucrose substitute.