Diabetes is characterized by hyperglycemia, loss of functional islet beta cell mass, deficiency of glucose-lowering insulin, and persistent alpha cell secretion of gluconeogenic glucagon. Still, no therapies that target these underlying processes are available. We therefore performed high-throughput screening of 300,000 compounds and extensive medicinal chemistry optimization and here report the discovery of SRI-37330, an orally bioavailable, non-toxic small molecule, which effectively rescued mice from streptozotocin- and obesity-induced (db/db) diabetes. Interestingly, in rat cells and in mouse and human islets, SRI-37330 inhibited expression and signaling of thioredoxin-interacting protein, which we have previously found to be elevated in diabetes and to have detrimental effects on islet function. In addition, SRI-37330 treatment inhibited glucagon secretion and function, reduced hepatic glucose production, and reversed hepatic steatosis. Thus, these studies describe a newly designed chemical compound that, compared to currently available therapies, may provide a distinct and effective approach to treating diabetes.