Abstract: This work aimed to investigate the hypoglycemic effect of Paccilomyces hepiali extract(PHAE)and its mechanism. Type 2 diabetic C57BL/6J mice model was induced by streptozotocin(STZ). The effects of PHAE on blood glucose and lipid level of diabetic mice were investigated. In addition,the hypoglycemic mechanism was also investigated in mice islets hybridoma cell line MIN6. Compared with the diabetic mice,PHAE(1000 and 3000 mg/kg)administration for 20 days led to a significant increase in bodyweight and serum insulin(p<0.05),reduction in fasting glucose levels,and the densities of serum cholesterol,triglyceride and low-density lipoprotein cholestrol(p<0.05). The results in vitro showed that PHAE stimulated cell proliferation and promoted MIN6 cells to release insulin and it also significantly increased Epac2 protein expression compared with untreated cells. Taken together,the results of the present work proved the hypoglycemic and hypolipidemic activity of Paccilomyces hepiali Cs-4 extract. The hypoglycemic effect of PHAE might be explained by promoting insulin secretion in pancreatic islet cells. The results of this study could provide useful data for furture development and application of Paeccilomyces hepiali.