Obesity is a notable risk factor for developing type 2 diabetes, augmenting the concern of obese diabetes (ObD). Anti-obesity and antioxidant effects of red pepper seeds extract (RPSE) have increased our expectations that RPSE would also improve the pathological phenotypes of obese diabetes. Therefore, we hypothesized that RPSE would have an anti-diabetic effect in ObD mice. Animals were assigned either as follows: (1) db/+, (2) db/db control, (3) RPSE (200 mg/kg bw), or (4) a comparative control (metformin 150 mg/kg bw). RPSE was orally administered daily for 8 weeks. As a result, RPSE supplementation improved diabetic phenotypes, including fasting glucose, hemoglobin (HbA1c), and insulin levels. Pro-inflammatory cytokines, tumor necrosis factor-alpha (TNF-α) and interleukin 6 (IL-6), and triglycerides were reduced in RPSE-treated mice. RPSE supplementation also diminished the rate-limiting enzymes of gluconeogenesis, including glucose 6-phosphatas (G6Pase) and phosphoenolpyruvate carboxykinase (PEPCK), in the liver. RPSE supplementation increased the phosphorylation of forkhead box protein O1 (FOXO1) and AMP-activated protein kinase (AMPK), which underlined the mechanism of the anti-diabetic effects of RPSE. Taken together, RPSE has the potential to improve glycemic control by repressing hepatic gluconeogenesis via the phosphorylation of FOXO1 and AMPK in ObD mice.