Casearia esculenta, a medicinal plant (Roxb.) is widely used in traditional system of medicine to treat diabetes in India. In the present study, using bioassay-guided fractionation techniques, a novel anti-diabetic compound was isolated from the C. esculenta root. Structural determination of the anti-diabetic compound was done using different spectral techniques like Fourier transform infrared spectroscopy (FTIR), Nuclear magnetic resonance (NMR, 1H, 13C) and mass spectrometry (MS). The spectral and analytical data led to the structure of compound is 3-hydroymethyl xylitol (3-HMX), a novel anti-diabetic compound. Efficacy and optimum dose of 3-HMX was determined in a 15 day short duration study using streptozotocin (STZ)-diabetic rats. Administration of 3-HMX at 20, 40 and 80 mg/kg body weight (BW) gave significant reduction of body weight, insulin and increased the plasma glucose level in STZ-diabetic rats. Since 3-HMX at 40 mg dose reversed these parameters towards normalcy and it was fixed as the optimum dose. This invention has been patented, and the patent was granted (Patent Grant No. 243139). The long-term (45 days) effect of 3-HMX also investigated in STZ-diabetic rats. Diabetic rats had altered the glucose, insulin, hemoglobin (Hb), glycated hemoglobin (HbA1c), hepatic glycogen, and activities of carbohydrate metabolizing enzymes. In addition, hepatic marker enzymes, lipid peroxidatvie markers, enzymic and non-enzymic antioxidants status has been altered in normal and STZ-diabetic rats. An optimum dose of 3-HMX (40 mg/kg BW) or glibenclamide was orally administered for 45 days to STZ-diabetic rats. 3-HMX at 40 mg dose produced similar effects on all biochemical parameters studied as that of glibenclamide, a standard drug. Histological study of pancreas and liver also confirmed the biochemical findings. These results indicate that 3-hydroxymethyl xylitol, a novel compound from C. esculenta, possesses antihyperlipidemic, antioxidant and antiperoxidative activities. Furthermore, clinical trails could be carried out.