Cotton lavender (Santolina chamaecyparissus L., Asteraceae) is a widespread medicinal and ornamental plant. This study aimed to evaluate the preliminary and detailed chemical composition as well as the biological activity of ethanolic extract. As part of the preliminary characterization, the content of total phenolics and flavonoids was determined, while the detailed characterization was performed using high-performance liquid chromatography (HPLC). Antioxidant activity was evaluated through four different tests: 2,2-diphenyl-1-picrylhydrazyl (DPPH), hydroxyl (OH•), and nitroso (NO•) radicals, and lipid peroxidation (LP), as well as antihyperglycemic potential through the α-amylase and α-glucosidase inhibition assays. Additionally, in silico molecular modeling was employed to link the chemical composition to the antihyperglycemic potential. Chemical characterization showed that cotton lavender is a valuable source of phenolic compounds, with ferulic and p-coumaric acids being the most abundant. Moreover, the antihyperglycemic and antioxidant potential of the ethanolic extract was demonstrated in vitro. The potential mechanism of the antihyperglycemic effect is the inhibition of the enzyme α-glucosidase, which was further investigated in silico using molecular modeling methods. This analysis suggested rutin and quercetin as compounds responsible for anti-α-glucosidase activity. Cotton lavender ethanolic extracts, as a valuable source of phenolic and flavonoid compounds, possess moderate antioxidant effects and notable antihyperglycemic activity. According to in vitro and in silico investigations, it could be a valuable herbal supplement to complement diabetes treatment in medicinal therapy.