The present investigation studied a novel bilayer tablet having an extended release system of metformin HCl with Eudragit RS 100 and RL 100 and an immediate release system of acarbose with polyvinylpyrrolidone K30 (PVP K30) and polyethylene glycol 6000 (PEG 6000) in different ratios using solvent evaporation and cogrinding techniques. Solid dispersions (SDs) were characterized by Fourier transform infrared spectroscopy (FT-IR), differential scanning calorimetry (DSC), powder x-ray diffractometry (XRD), scanning electron microscopy (SEM), as well as by content uniformity, in vitro dissolution studies, and release kinetics. The selected SD system was subjected to bilayer tablet preparation by direct compression. Compressed tablets were evaluated for drug content, weight variation, friability, hardness, and thickness, and they underwent in vitro dissolution studies. The progressive disappearance of IR, x-ray, and thermotropic drug signals in SDs and physical mixtures were related to increasing amount of polymer. SEM studies suggested the homogenous dispersion of drug in polymers. FT-IR studies confirmed the formation of hydrogen bonding between drug and polymer. All tablet formulations showed compliance with pharmacopoeial standards. The formulations gave an initial burst effect to provide the loading dose of the drug followed by extended release for 12 h (Higuchi model via a non-Fickian diffusion controlled release mechanism). Stability studies conducted for the optimized formulation did not show any change in physical properties, drug content, or in vitro drug release. The goal of diabetes therapy today is to achieve and maintain as near normal glycemia as possible to prevent the long-term microvascular and macrovascular complications of elevated blood glucose levels. Oral therapeutic options for the treatment of type 2 diabetes mellitus, until recently, have been severely limited. Metformin, a biguanide, targets additional mechanisms of hyperglycemia by inhibiting hepatic glucose production and enhancing peripheral glucose uptake and thereby reducing insulin resistance; acarbose reversibly bind to pancreatic alpha-amylase and membrane-bound intestinal alpha-glucoside hydrolases. These enzymes inhibit hydrolysis of complex starches to oligosaccharides in the lumen of the small intestine and hydrolysis of oligosaccharides, trisaccharides, and disaccharides to glucose and other monosaccharides in the brush border of the small intestine. The two agents were found to have a remarkable effect on glycemic control. In the present investigation a bilayer tablet was prepared in which one layer gives instant action against diabetes and another layer maintain concentration of drug in plasma for longer periods.