Bile acid sequestrants (BAS) have shown antidiabetic effects in both humans and animals but the underlying mechanism is not clear. In the present study, we evaluated cholestyramine in Zucker diabetic fatty (ZDF) rats. Although control ZDF rats had continuous increases in blood glucose and hemoglobin A1c (HbA1c) and serum glucose and a decrease in serum insulin throughout a 5-week study, the cholestyramine-treated ZDF rats showed a dose-dependent decrease and normalization in serum glucose and HbA1c. An oral glucose tolerance test showed a significant increase in glucose-stimulated glucagon-like peptide 1 (GLP-1), peptide YY (PYY), and insulin release in rats treated with cholestyramine. Quantitative analysis of gene expression indicated that cholestyramine treatment decreased farnesoid X receptor (FXR) activity in the liver and the intestine without liver X receptor (LXR) activation in the liver. Moreover, a combination of an FXR agonist with cholestyramine did not reduce the antihyperglycemic effect over cholestyramine alone, suggesting that the FXR-small heterodimer partner-LXR pathway was not required for the glycemic effects of cholestyramine. In summary, our results demonstrated that cholestyramine could completely reverse hyperglycemia in ZDF rats through improvements in insulin sensitivity and pancreatic beta-cell function. Enhancement in GLP-1 and PYY secretion is an important mechanism for BAS-mediated antidiabetic efficacy.