We aimed to investigate the protective effect of FTY-720 on liver injury and explore its potential mechanism in diabetic mice. The diabetic mouse model was induced with streptozotocin and FTY-720 was administered for 12 weeks. We assayed biocharacters and liver function, and used histopathology staining to evaluate the protective effects of FTY-720 against diabetic liver injury. Levels of oxidative stress and inflammation in the liver were observed. mRNA and protein levels of essential enzymes for glucose metabolism were quantified in the liver and the protein expression of TLR4, HIF1α, and NF-κB was determined. In vivo results revealed that FTY-720 significantly lowered blood glucose and lipids, and improved liver function and alleviated liver fibrosis in diabetic mice. FTY-720 reduced oxidative stress and inflammation, with the increased catalase activity and reduced levels of malondialdehyde, myeloperoxidase, IL-1β, IL-6, TNF-α, TGF-β and MCP1. Furthermore, FTY-720 modulated glucose metabolism in liver and elevated the ATP production, showing the promotion of glycogenesis and glycolysis and inhibition of gluconeogenesis. Moreover, FTY-720 inhibited the expression of TLR4 and HIF1α, contributing to restoration of liver function. In conclusion, FTY-720 ameliorates diabetes-induced liver injury and improves glucose homeostasis by inhibiting oxidative stress and inflammation, and may be a promise drug for treatment of liver disease.