The aim of this study was to investigate the hypoglycemic effect of Thymoquinone in Streptozotocin (STZ)-induced diabetic rats and to elucidate the mechanisms underlying the hypoglycemic effect in terms of hepatic glucose production. Diabetes was induced by intraperitoneal injection of 65 mg/kg body weight of STZ. Treatment with Thymoquinone commenced 4 weeks after induction of diabetes at a dose of 50 mg/kg body weight by gastric gavage. Isolated hepatocytes were collected using collagenase to determine liver glucose production. Thymoquinone reduced blood glucose from 350 ± 4.1 mg/dl before treatment to 262 ± 3.2, 194 ± 3.9 and 184 ± 3.1mg/dl after 10, 20 and 30 days of treatment, respectively. Hepatic glucose production from gluconeogenic precursors (alanine, glycerol and lactate) was significantly decreased in treated rats. Our data indicated that Thymoquinone possesses hypoglycemic effect in STZ-diabetic rats. The Hypoglycemic effect of Thymoquinone is in part due to a decrease in hepatic gluconeogenesis.