The reactions of alloxan and its derivatives with glutathione (γ-glutamylcysteinylglycine, GSH), a sulfhydryl (-SH) antioxidant, antitoxin, and enzyme cofactor, were studied using the density functional theory (DFT). The potent reducing power of GSH is responsible for its free-radical scavenging, electron-donating, and sulfhydryl-donating capacities. Alloxan reacts with GSH to produce alloxan AH and glutathione GS radicals. AH reacts with another GSH molecule to produce dialuric acid. The reactions involved in the alloxan-dialuric acid redox cycle with glutathione participation were also investigated. According to our research on the structure of glutathione and its reaction with alloxan, the dissociation of the sulfhydryl group results in the formation of a sulfur-centered radical (HAT mechanism), which is the cause of the scavenging reaction. This reacts with an alloxan radical and either converts it to a dialuric acid anion or forms a complex known as ‘Compound 305′ with it. The calculated redox potentials at physiological pH indicate that one-electron reduction is not thermodynamically possible. Instead, a two-electron reduction occurs, which directly produces a dialuric acid anion. In addition, a systematic study was conducted on alloxan-like substances that do not cause diabetes, to determine the changes in these substances that are responsible for the loss of diabetogenicity. The lipophilicity and electron affinity of alloxan derivatives were found to be inversely correlated, indicating that increasing the chain length of N-substituted derivatives decreased diabetogenicity in both counts. The electron affinity appears to be the most important parameter for determining the diabetogenicity of alloxan-like compounds derived from uric acid.