This study evaluated the effects of Inonotus obliquus polysaccharides (IOs) on diabetes and other underlying mechanisms related to inflammatory factors and oxidative stress in a mouse model of streptozotocin (STZ)-induced diabetes. Four weeks administration of metformin (120 mg/kg) and IO1-4 (50%-80% alcohol precipitation), or IO5 (total 80% alcohol precipitation) at doses of 50 mg/kg reverses the abnormal changes of bodyweights and fasting blood glucose levels of diabetic mice. IOs significantly increased the insulin and pyruvate kinase levels in serum, and improved the synthesis of glycogen, especially for IO5. IOs restored the disturbed serum levels of superoxide dismutase, catalase, glutathione peroxidase, and malondialdehyde. The down-regulation of interleukin-2 receptor, matrix metalloproteinase-9, and the enhancement of interleukin-2 in serum of diabetic mice were significantly attenuated by IOs. Histologic and morphology examinations showed that IOs repaired the damage on kidney tissues, inhibited inflammatory infiltrate and extracellular matrix deposit injuries in diabetic mice. Compared with untreated diabetic mice, IOs decreased the expression of phosphor-NF-κB in the kidneys. These results show that IOs treatment attenuated diabetic and renal injure in STZ-induced diabetic mice, possibly through the modulation of oxidative stress and inflammatory factors. These results provide valuable evidences to support the use of I. obliquus as a hypoglycemic functional food and/or medicine.