A water-soluble polysaccharide isolated with hot water from the fruit of Physalis alkekengi L. which is a traditional Chinese medicine herb was fractionated with different concentration of ethanol and purified by Sepharose CL-6B gel filtration chromatography. The structural characterization and hypoglycemic activity of the purified polysaccharide fraction (designated PPSB) were evaluated in this paper. PPSB ( M w = 27 kDa) is an acid heteropolysaccharide consisting of Ara, Gal, Glc and GalA in ratio of 2.6:3.6:2:1 and α-configuration. It has a backbone composed of (1→5)-linked Ara, (1→6)-linked Gal with three branches attached to O-3 of (1→6)-linked Gal and terminated with either Gal or Gal and Glc, and all of Glc and the majority of GalA are distributed in branches. Pharmaceutical experiments showed PPSB administered orally in alloxan-induced diabetic mice can significantly reduce blood glucose levels and water intake, and increase the body weight of diabetic mice compared with alloxan-induced diabetic control group. The results suggest PPSB could be considered as a potential candidate for developing a new anti-diabetic agent.