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The roots of Paeonia lactiflora (PL) has been traditionally used as analgesic, spasmolytic and tonic in Korea, China, and Japan. As part of a search for herbal medicine to treat diabetes and obesity, we confirmed hypoglycemic effect of PL through high fat diet-induced obese and diabetic mice experiments in vivo. Treatment of ethanolic extract from PL led to a significant decrease in glucose level, which is comparable to that of an antidiabetic drug metformin. In addition, PL selectively stimulates the transcriptional activities of both peroxisome proliferator-activated receptor $(PPAR){\alpha}$ and ${\gamma}$, and inhibits enzymatic activity of protein tyrosine phosphatase 1B (PTP1B), which are predicted to be therapeutic target in treatment of type2 diabetes and obesity. Especially, the n-hexane fraction (Hx) from PL ethanol extract showed more potent activities on $PPAR{\alpha}$ and than others and exihibited moderate inhibitory activity against PTP1B.