Bioethanol is being considered as a potential liquid fuel due to limited amount of natural resources. Bioethanol produced from renewable biomass (lignocellulosic material) is one of the best eco–friendly method employed to eradicate the notorious aquatic weed permanently. This alternative approach also meets the increasing energy demands within the transport sector, therefore decreasing hazardous gas emissions. The medicinal properties of this plant have also been explored to certain extent. The purpose of present work is to study the production of ethanol from water hyacinth, used as substrate, using isolated microbial strain and to explore its antidiabetic property. The substrate concentration 1.1*10^–2 M is efficient for bioethanol production. The ethanol yield estimated by potassium dichromate method is found to be 5.2ml. The plant exhibits the hypoglycemic effect which is confirmed by α–Amylase inhibitory assay.