Glycyrrhizin is an active constituent of the roots and rhizomes of Glycyrrhiza glabra and has anti-hyperglycemic effects. In this study, nanoparticles (NPs) loaded with glycyrrhizin or metformin were evaluated in vivo for their anti-hyperglycemic potency towards type-II diabetes in rats. The NPs were produced via the ionotropic gelation method using the biocompatible polymers chitosan and gum arabic. The polymer concentration was optimized using the 32 factorial method to acquire both minimum particle size and maximum encapsulation efficiency. The NPs were then characterized with respect to particle size, encapsulation efficiency, stability, chemical interactions, and in vitro drug dissolution profiles using spectroscopic and microscopic analysis. Furthermore, glycyrrhizin and metformin and their nanoformulations were administered for 21 successive days to diabetic rats. Glycyrrhizin-loaded NPs had significant anti-diabetic effects even though they contained approximately one quarter of the dosage relative to the pure form.