Non-insulin dependent diabetes mellitus (NIDDM) is a multifactorial disease, which is characterized by hyperglycemia and lipoprotein abnormalities. Herbal medicines have been used for many years to overcome this global health problem. Therefore, the present study was undertaken to evaluate the antidiabetic and antihyperlipidemic effect of ethanolic extract of aerial parts of Salvadora persica in alloxan induced diabetic rats. Diabetes was induced by administration of alloxan monohydrate (120mg/kg, i.p.). Normal as well as diabetic albino rats were divided in to four groups receiving different treatments: vehicle (control), ethanolic extract (1g and 2g/kg b.w.) and standard drug tolbutamide (0.5g/kg b.w.) for 21 days. Fasting blood glucose and lipid parameters i.e. triglycerides, total cholesterol, high density lipoprotein, low density lipoprotein and very low density lipoprotein were measured. The ethanolic extract produced significant reduction (p<0.01) in blood glucose and also had beneficial effect (p<0.01) on lipid profile in normal and diabetic rats at the end of the treatment period. The antidiabetic effect of the extract was similar to that observed for tolbutamide. Thus the present study reveals that the ethanolic extract of S. persica may be effective in controlling blood glucose level and in improving lipid profile in normal as well as diabetic rats.