The aim of this study was to observe the antidiabetic effect and mechanism of chitooligosaccharides (COS). Type 2 diabetic rats were fed a high-energy diet together with an injection of streptozotocin (STZ). After 8 weeks of COS treatment, the changes in glycometabolism, insulin sensitivity, serum hepatic marker enzyme levels, liver glycogen content, expressions of glucose transporter GLUT-4, malonaldehyde content, superoxide dismutase activity and morphology of the pancreas were observed. The results showed that COS significantly reduced fasting blood glucose (FBG), fasting insulin (FINS), increased the insulin sensitivity index (ISI) and improved oral glucose tolerance. COS increased liver glucokinase activity and glycogen content and upregulated the expressions of GLUT-4 mRNA in adipose and soleus muscle. They also raised the superoxide dismutase activity and reduced the malonaldehyde content in pancreas homogenate. Pancreas hematoxylin/eosin (HE) staining of the diabetic rats showed ruptured islet, but changes of pancreatic islet in the animals were minimized by administration of COS. The effect of COS on pancreatic β cell (INS-1) in vitro was also examined. It was found that COS played important roles in INS-1 cells by promoting proliferation, increasing glucose stimulated insulin release, upregulating the expressions of GLUT-2 mRNA and protecting against STZ-induced apoptosis. The results from the present study indicate COS have protective effect for type 2 diabetes by ameliorating insulin resistance, promoting the proliferation of β cells, increasing insulin secretion and protecting β cells.