Background: Several studies have affirmed the effectiveness of some Bauhinia plants as antihyperglycemic agents. Objective: We investigated the possible effect of Bauhinia vahlii leaves extract in reducing hyperglycemia and reversing signs of organ damage associated with diabetes in streptozotocin (STZ) rat model. Materials and Methods: Both polar fraction of the B. vahlii leaves (defatted ethanolic extract [DEE]) and nonpolar fraction (n-hexane extract) were evaluated in vitro for α-glucosidase inhibition and 2,2-diphenyl-1-picrylhydrazyl radical scavenging potential. DEE was selected for further in vivo studies and was administered at two doses, i.e., 150 or 300 mg/kg to STZ-diabetic rats for 4 weeks. Results: Only DEE exhibited in vitro antioxidant and antihyperglycemic activities and its oral administration at both dose levels resulted in significant reduction in fasting blood glucose and glycated hemoglobin. Furthermore, signs of oxidative stress as indicated by hepatic reduced glutathione, nitric oxide, and malondialdehyde levels were completely reversed. In addition, histopathological examination and measurement of serum aspartate transaminase and alanine transaminase levels showed that DEE protected the liver from signs of liver pathogenesis when compared to diabetic untreated animals and those treated with metformin. Phytochemical analysis of DEE showed high flavonoids content with quercitrin as the major constituent along with other quercetin glycosides. Conclusion: This study strongly highlights the possible beneficial effect of B. vahlii leaves extract in relieving hyperglycemia and liver damage in STZ-diabetic rats and recommends further investigation of the value of quercetin derivatives in controlling diabetes and ameliorating liver damage associated with it.