In this study, the effect of dahi containing probiotic Lactobacillus acidophilus NCDC14 and Lactobacillus casei NCDC19 (∼73×108 cfu/g) on progression of streptozotocin (STZ)-induced diabetes in rats (15 g/day/rat) for 28 days was investigated. Feeding of probiotic dahi significantly suppressed the incremental peaks and area under the curve and delayed reduction of insulin secretion during oral glucose tolerance test more than skim milk or control dahi. The feeding of milk products reduced the total cholesterol, triglycerides, LDL and VLDL-cholesterol and increased HDL-cholesterol levels (P<0·05). Moreover, probiotic dahi significantly suppressed STZ-induced oxidative damage in pancreatic tissues by inhibiting the lipid peroxidation and formation of nitric oxide, and preserving antioxidant pool such as glutathione content and activities of superoxide dismutase, catalase and glutathione peroxidase. The results suggest that the supplementation of probiotic Lb. acidophilus and Lb. casei with dahi cultures increased the efficacy of dahi to suppress STZ-induced diabetes in rats by inhibiting depletion of insulin as well as preserving diabetic dyslipidemia, and inhibiting lipid peroxidation and nitrite formation. This may empower antioxidant system of β-cells and may slow down the reduction of insulin and elevation of blood glucose levels.