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Diabetes mellitus is characterized by hyperglycemia and associated complications. However, long-term diabetes control is not often sustained by currently available therapeutic approaches. Research on nanoparticle-mediated drug delivery systems is in progress. Here we have tested a ligand (argpyrimidine)-tagged drug (rutin)-encapsulated biocompatible (ethylene glycol dimers) nanoparticle for targeted drug delivery in streptozotocin-induced diabetic rats. Argpyrimidine, being an advanced glycation end product (AGE), directs the nanoparticles to interact with cell surface receptors of AGEs (RAGE) and delivers the drug into the cells. The bioflavonoid rutin possesses antihyperglycemic property, and has been used for nanocapsulation. Two doses of nanoparticles containing 20 mg rutin/kg body weight were administered (i.v. at 7 days interval) into streptozotocin-induced diabetic rats. Compared to free rutin, nanoparticle treatment appears to be significantly more effective in controlling the diabetogenic effects – hyperglycemia, hyperlipidemia, oxidative stress etc, including heart-associated complications. This approach may thus be explored for drug delivery in the treatment of diabetes mellitus.