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Background and Purpose: Type 2 diabetes is one of the most severe chronic diseases and is an increasingly important public health problem worldwide. Several agonists of the glucagon‐like peptide‐1 (GLP‐1) receptor have been developed to treat Type 2 diabetes but most of them are administered by injection. This mode of administration seriously reduces patient compliance and increases the risk of infection. Here, we describe the actions of a novel, orally available, GLP‐1 receptor agonist ‐ oral hypoglycaemic peptide 2 (OHP2) ‐ derived from exendin‐4 by replacing amino acids. We have also investigated its pharmacokinetic profiles, therapeutic effects and absorption mechanism. Experimental Approach Healthy Wistar rats were used for pharmacokinetic analyses. In diabetic db/db mice. OHP2 was given for 8 weeks to evaluate its effects on hyperglycaemia, dyslipidaemia, basal metabolism and tissue injury. Possible endocytosis and transcytosis mechanisms of OHP2 uptake were explored in Caco‐2 cell monolayers. Key Results: In rats, the absolute bioavailability of orally administered OHP2 was 20‐fold greater than that of orally administered exendin‐4. In db/db mice, OHP2 dose‐dependently exhibits good potential in glucose‐lowering and weight loss after oral administration. OHP2 also alleviated hyperlipidaemia, ameliorated energy metabolism and promoted tissue repair in diabetic mice. Furthermore, uptake of OHP2 by Caco‐2 cells was dependent on caveolae‐mediated transcytosis rather than endocytosis mediated by GLP‐1 receptors. Conclusions and Implications: OHP2 is a potential, orally bioavailable, candidate drug for the treatment of Type 2 diabetes. Its transcytosis mechanism of uptake could help in the development of absorption enhancers of OHP2. [ABSTRACT FROM AUTHOR]