Anacardium occidentale (cashew tree) belongs to the Anacardiaceae family and has been well used in folklore medicine for the treatment of various ailments such as gastrointestinal disorders, hypertension and diabetes. Literature is replete with reported anti-diabetic actions of cashew leaf. The molecular mechanism of the hypoglycemic activity of A. occidentale was investigated in this study. Insulin, Glucagon like peptide-1 (GLP-1), dipeptidyl peptidase-4 (DPP-4) and marker of proliferation KI67 (MKI67) gene modulation by A. occidentale was investigated in vivo by RT-PCR and possible compounds responsible for anti-diabetic action predicted through in silico approach. Phytochemicals previously characterized from A. occidentale through GC−MS analysis were docked into glutamine fructose-6-phosphate amidotransferase (GFAT), glucagon like peptide-1 receptor (GLP-1r), dipeptidyl peptidase (DPP-4) using Autodock Vina. In silico findings suggest alphacadinol (ligand for DDP-4 and GFAT) and betacaryophylene (ligand for GLP-1r) as the major anti-diabetic compounds in cashew leaf. In vivo study showed increase in GLP-1, insulin and MKI-67 expression in A. occidentale-treated rats compared to the controls. This study indicates that the underlying molecular mechanisms of the actions of these compounds is through activation of insulin and GLP-1 receptor. This work confirmed the use of this plant in diabetes management and the probable bioactive components eliciting anti-diabetic effects are alphacadinol (a sesquiterpenoid) and betacaryphylene (a sesquiterpene) and both belong to the class of terpenes.