Diabetes is characterized by hyperglycemia, loss of functional islet beta cell mass, deficiency of glucose-lowering insulin, and persistent alpha cell secretion of gluconeogenic glucagon. Still, no therapies that target these underlying processes are available. We therefore performed high-throughput screening of 300,000 compounds and extensive medicinal chemistry optimization and here report the discovery of SRI-37330, an orally bioavailable, non-toxic small molecule, which effectively rescued mice from streptozotocin- and obesity-induced (db/db) diabetes. Interestingly, in rat cells and in mouse and human islets, SRI-37330 inhibited expression and signaling of thioredoxin-interacting protein, which we have previously found to be elevated in diabetes and to have detrimental effects on islet function. In addition, SRI-37330 treatment inhibited glucagon secretion and function, reduced hepatic glucose production, and reversed hepatic steatosis. Thus, these studies describe a newly designed chemical compound that, compared to currently available therapies, may provide a distinct and effective approach to treating diabetes. Display omitted •The small molecule SRI-37330 inhibits TXNIP expression in mouse and human islets•SRI-37330 decreases glucagon secretion and action and blocks hepatic glucose output•Oral SRI-37330 reverses obesity- and STZ-induced diabetes and hepatic steatosis in mice•Its antidiabetic effects and safety profile make SRI-37330 an attractive drug candidate Here, Thielen et al. show that a newly designed, orally available small molecule inhibited pancreatic islet TXNIP expression, glucagon secretion, hepatic glucagon action, glucose production, and steatosis, and exhibited strong anti-diabetic effects in mouse models of type 1 and type 2 diabetes, promising a distinct and innovative diabetes treatment approach.