The objective of this study was to evaluate a novel blend of polyvinyl caprolactam-polyvinyl acetate-polyethylene glycol 6000 grafted copolymer (Soluplus®) and polyethylene glycol (PEG) 4000 for solubility enhancement, physicochemical stability and anti-diabetic efficacy of the produced solid dispersions containing glimepiride, a biopharmaceutics classification system (BCS) class II sulphonylurea. Different batches of glimepiride solid dispersions (SD) were prepared by the solvent evaporation method using the individual polymers and blends of the polymers at different ratios. The Soluplus®-PEG 4000 (sol-PEG) hybrid polymer based glimepiride solid dispersions were characterized by differential scanning calorimetry (DSC), fourier transform infrared (FTIR) spectroscopy, micromeritics and dissolution studies. In vivo anti-diabetic activity was determined by measuring the changes in blood glucose concentrations in albino rats. The solid dispersions showed good flow properties and excellent practical yield. Drug content and release from the different formulations increased when Soluplus® was used as the main matrix polymer. The kinetics of drug release from all the solid dispersions followed first order. Solid state characterization confirmed the formation of amorphous glimepiride solid dispersions in the Sol-PEG hybrid polymer and no strong drug–polymer interaction was observed. The blood glucose reduction in albino rats by the Sol-PEG-Glim SDs was significantly (p < 0.05) higher and more sustained when compared with the plain drug sample and commercially available product. Optimized SD batches (SP1 and SP3) showed a reduction in blood glucose level from 100% to 9.81% and 8.97%, respectively, at Tmax of 3 h. The Sol-PEG-Glim SD was found to be stable over a period of 6 months (at 40 °C, 70% RH) with no significant changes in the drug content. Thus, the Sol-PEG polymeric hybrids represent a promising tool for enhanced delivery of glimepiride.