Background: Xiaoxianxiong decoction is a classic formula in traditional Chinese medicine used to treat type 2 diabetes mellitus and proven to be effective. But the material basis and underlying mechanisms remain unclear. The aim of the present study was to elucidate the potential effective material basis of Xiaoxianxiong decoction and molecular mechanism treating type 2 diabetes mellitus. Methods: The absorbed bioactive components were identified based on serum pharmacochemistry. Network analysis were performed to obtain effect targets for docking verification with the absorbed prototypes to determine the potential effective material basis. On the above basis, network pharmacology was conducted to explore the molecular mechanism. Results: 76 compounds were identified of Xiaoxianxiong decoction and 61 absorbed bioactive compounds were investigated. Serine/threonine kinase 1 and ALB were key targets acquired by network analysis for molecular docking. Subsequently, 5 compounds were considered as the potential effective material basis, namely berberine, berberrubine, lariciresinol and gingerenone A, jatrorrhizine. Further, the mechanism mainly lies in the insulin signaling pathway, HIF-1 signaling pathway, PI3K-Akt signaling pathway, FoxO signaling pathway, AGE-RAGE signaling pathway in diabetic complications, phospholipase D signaling pathway to regulate blood glucose levels on target tissues as well as organs and exhibit anti-inflammatory, promote cell differentiation and cell growth, maintain oxygen homeostasis and affect the enzymes along with key metabolites. Conclusion: This integrated research strategy to investigate the treatment of Xiaoxianxiong decoction on type 2 diabetes mellitus provides valuable insights for further study and clinical practice of Xiaoxianxiong decoction.