The aim of this study was to investigate the antidiabetic effects of a Tibetan medicine, Tang-Kang-Fu-San (TKFS), on experimental type 2 diabetes mellitus (T2DM) rats and to explore its underlying mechanisms. Firstly two major chemical compositions of TKFS, gallic acid and curcumin, were characterized by HPLC fingerprint analysis. Next T2DM in rats was induced by high-fat diet and a low-dose streptozotocin (STZ 35 mg/kg). Then oral gavage administration of three different doses of TKFS (0.3 g/kg, 0.6 g/kg, and 1.2 g/kg) was given to T2DM rats. Experimental results showed that TKFS dramatically reduced the levels of fasting blood glucose, fasting blood insulin, triglyceride, total cholesterol, LDL cholesterol, and HDL cholesterol, even though it did not alter the animal body weight. The downregulation of phosphorylation-AKT (p-AKT) and glucose transporter-4 (GLUT4) in skeletal muscle of T2DM rats was restored and abnormal pathological changes in pancreas tissues were also improved. Our work showed that TKFS could alleviate diabetic syndromes, maintain the glucose homeostasis, and protect against insulin resistance in T2DM rats, and the improvement of AKT phosphorylation and GLUT4 translocation in skeletal muscle would be one of its possible underlying mechanisms.