Diabetes mellitus is a multifactorial, heterogeneous metabolic disorder, causing various health complications and economic issues, which apparently impacts the human’s life. Currently, commercial diabetic drugs are clinically managed for diabetic treatment that has definite side effects. Dietary polysaccharides mainly derive from natural sources, including medicinal plants, grains, fruits, vegetables, edible mushroom, and medicinal foods, and possess anti-diabetic potential. Hence, this review summarizes the effects of dietary polysaccharides on diabetes and underlying molecular mechanisms related to inflammatory factors, oxidative stress, and diabetes in various animal models. The analysis of literature and appropriate data on anti-diabetic polysaccharide from electronic databases was conducted. In vivo and in vitro trials have revealed that treatment of these polysaccharides has hypoglycemic, hypolipidemic, antioxidant, and anti-inflammatory effects, which enhance pancreatic β-cell mass and alleviates β-cell dysfunction. It enhances insulin signaling pathways through insulin receptors and activates the PI3K/Akt pathway, and eventually modulates ERK/JNK/MAPK pathway. In conclusion, dietary polysaccharides can effectively ameliorate hyperglycemia, hyperlipidemia, low-grade inflammation, and oxidative stress in type 2 diabetes mellitus (T2DM), and, thus, consumption of polysaccharides can be a valuable choice for diabetic control.