A series of 2-aryl-naphtho[1,2-d]oxazole derivatives have been synthesized and evaluated for PTP-1B inhibitory activity. The compounds have been screened in vivo for antidiabetic activity under sucrose loaded model (SLM), sucrose-challenged streptozotocin-induced diabetic rat model (STZ-S) and db/db mice model. Compounds 8 and 12 have shown promising PTP-1B inhibitory activity, significant antidiabetic activity, moderate lipid and triglyceride lowering activity.