The present study is an extension of our previous work carried out on Cynodon dactylon. This study deals with the critical evaluation of glycemic potential of ethanolic extract of defatted C. dactylon. The doses of 250, 500 and 750 mg kg−1 bw of the extract were administered orally to normal as well as Streptozotocin-induced diabetic rats to study its glycemic potential. The effect of repeated oral administration of the same doses of ethanolic extract was also studied on serum lipid profile of severely diabetic (SD) rats. The dose of 500 mg kg−1 bw was identified as the most effective dose as it lowered the blood glucose levels of normal by 42.12% and of diabetic by 43.42% during fasting blood glucose (FBG) and glucose tolerance test respectively. The SD rats were also treated daily with this identified dose of 500 mg kg−1 bw for 2 weeks and a significant reduction of 56.34% was observed in FBG level. Total cholesterol, low density lipoprotein and triglyceride levels were also decreased by 32.94, 64.06 and 48.46% respectively in SD rats whereas, cardioprotective high density lipoprotein increased by 16.45%. The reduced urine sugar level and increased body weight are additional advantages. These evidences clearly indicate that the ethanolic extract of defatted C. dactylon has high antidiabetic potential along with good hypolipidemic profile.