This study was designed to investigate the antioxidant, anti-inflammatory and metabolism modulating activities of pseudoberberine (Y53), a berberine (BBR) analogue, in diabetic mice with fatty liver. Diabetes Mellitus (DM) of the C57BL/6J mice was induced by High Fat Diet (HFD)-feeding followed by single dose intraperitoneal injection of streptozotocin (STZ) (120 mg kg–1). The animals were treated with saline, 50 mg kg–1 of BBR, 50 mg kg–1 of Y53 or 100 mg kg–1 of BBR, respective. The results showed that Y53 potently lowered serum lipids and glucose, increased serum insulin and pancreas weight and upregulated hepatic expression of Low-Density Lipoprotein Receptor (LDLR) and Insulin Receptor (InsR). The Y53 also suppressed liver steatosis, reduced fat accumulation, liver weight and index and restored liver function in the mice. The mice developed obvious oxidative stress and proinflammatory response after the onset of DM. Y53 significantly increased superoxide dismutase (SOD) activity and reduced malondialdehyde (MDA) level in the serum, liver and pancreas. On the other hand, Y53 greatly reduced the mRNA expression levels of proinflammatory cytokines like interleukin-6 (IL-6) and Tumor Necrosis Factor-α (TNF-α) but increased those of nuclear factor erythroid-2-related factor-2 (Nrf2), heme oxygenase-1 (HO-1) and NADPH quinine oxidoreductase-1 (NQO-1) in the liver and pancreas of the mice. The efficacies of Y53 were superior to those of BBR at the same dose and close to those of BBR at double dose. Results indicate that Y53 may be developed as a new oral hypoglycemic agent in the future.