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This study investigated the antihyperglycaemic effectiveness of an oral Palmaria palmata protein hydrolysate (PPPH), versus metformin, upon metabolic control in streptozotocin (STZ)-induced diabetic mice. Mice were administered PPPH (50 mg/kg bodyweight) or metformin (200 mg/kg bodyweight) by oral gavage twice-daily for 18 days. Blood glucose and plasma insulin were measured every third day. PPPH caused a significant reduction in blood glucose (p < 0.001) and a significant increase in plasma insulin (p < 0.001) versus STZ-treated saline controls. PPPH treatment reduced energy intake (p < 0.05), bodyweight (p < 0.01) and total plasma glucagon-like peptide-1 (p < 0.01) after 18 days. Terminal oral glucose tolerance (Day 18, p < 0.05), fasting blood glucose (p < 0.001), HbA1C (p < 0.01), plasma cholesterol (p < 0.01) and plasma triglycerides (p < 0.05) were significantly improved versus STZ-treated saline controls. All groups showed significant increases in pancreatic islet area, β-cell area, and β:α cell ratio. PPPH demonstrated potent antidiabetic potential in vivo through reduced food intake and improved beta-cell function.