Streptozotocin induces diabetic pathophysiology that results in systematic apoptosis in pancreas that ultimately leads to diabetes characterized by abnormal glucose and lipid metabolism. The severity of diabetes increases along with life-threatening complications and side effects associated with oral hypoglycemic drugs. So, there is a need for traditional medicines with less or no side effects. Boswellia ovalifoliolata is a traditionally used medicinal plant. This study was aimed to investigate the antidiabetic and antihyperlipidemic activities of aqueous extract of stem bark of Boswellia ovalifoliolata (AESBBO). The phytochemical analysis of various extracts revealed the presence of flavonoids, glycosides, steroids, triterpenes, saponins, carbohydrates, alkaloids, and tannins. Either hexane, ethyl acetate, and methanol extracts did not produce any antidiabetic activity but aqueous extract showed that a significant antidiabtic activity could be due to presence of phytoconstituents like flavonoids, tannins, carbohydrates, and saponins in aqueous extract. The diabetic rats were treated with aqueous extract at a dosage of 200 mg/kg bw for 40 days. At the end of the study, the rats were dissected; blood and pancreas samples were collected to investigate the long-term effects. AESBBO exhibited antidiabetic and antihyperlipidemic potential effects by controlling fasting blood glucose levels, glycosylated hemoglobin, and lipid profiles with improved levels of plasma insulin. Histopathological investigation of pancreatic islets also confirmed that AESBBO efficiently ameliorated pancreatic alterations by improving damaged islets. Finally, it was concluded that the aqueous extract of stem bark of Boswellia ovalifoliolata at a dose of 200 mg/kg bw has significant antidiabetic and hyperlipidemic activities without causing any toxic effects.