Skeletal muscle atrophy is a disorder characterized by reductions in muscle size and strength. Cumin extract (CE) possesses anti-inflammatory, antioxidant, and hypoglycemic properties. Its pharmaceutical applications are hindered by its low water solubility and by its cytotoxicity when administered at high doses. In this study, we have developed a simplified water distillation method using a rotary evaporator to isolate the active components in cumin seeds. The anti-inflammatory effects of CE and its potential to ameliorate skeletal muscle atrophy in rats with streptozotocin (STZ)-induced diabetes were evaluated. The half-maximal inhibitory concentration (IC50) of CE for cells was 80 μM. By encapsulating CE in chitosan nanoparticles (CECNs), an encapsulation efficacy of 87.1% was achieved with a slow release of 90% of CE after 24 h of culturing, resulting in CECNs with significantly reduced cytotoxicity (IC50, 1.2 mM). Both CE and CECNs significantly reduced the inflammatory response in interleukin (IL)-6 and IL-1β assays. STZ-induced diabetic rats exhibited sustained high blood glucose levels (>16.5 mmol/L), small and damaged pancreatic β islets, and skeletal muscle atrophy. CE and CECN treatments ameliorated skeletal muscle atrophy, recovered muscle fiber striated appearance, increased grip strength, and decreased IL-6 level. Furthermore, CE and CECNs led to a reduction of damage to the pancreas, restoring its morphological phenotype, increasing serum insulin levels, and lowering blood glucose levels in STZ-induced diabetic rats. Taken together, treatment with CECNs over a 6-week period yielded positive ameliorative effects in STZ-induced rats of muscle atrophy.