This study evaluated the effects and the underlying mechanisms of casein glycomacropeptide hydrolysate (GHP) on high-fat diet-fed and streptozotocin-induced type 2 diabetes (T2D) in C57BL/6J mice. Results showed that 8-week GHP supplementation significantly decreased fasting blood glucose levels, restored insulin production, improved glucose tolerance and insulin tolerance, and alleviated dyslipidemia in T2D mice. In addition, GHP supplementation reduced the concentration of lipopolysaccharides (LPSs) and pro-inflammatory cytokines in serum, which led to reduced systematic inflammation. Furthermore, GHP supplementation increased muscle glycogen content in diabetic mice, which was probably due to the regulation of glycogen synthase kinase 3 beta and glycogen synthase. GHP regulated the insulin receptor substrate-1/phosphatidylinositol 3-kinase/protein kinase B pathway in skeletal muscle, which promoted glucose transporter 4 (GLUT4) translocation. Moreover, GHP modulated the overall structure and diversity of gut microbiota in T2D mice. GHP increased the Bacteroidetes/Firmicutes ratio and the abundance of S24-7, Ruminiclostridium, Blautia and Allobaculum, which might contribute to its antidiabetic effect. Taken together, our findings demonstrate that the antidiabetic effect of GHP may be associated with the recovery of skeletal muscle insulin sensitivity and the regulation of gut microbiota.