The peptides (PGH) in the < 1 kDa ultrafiltration (UF) fraction of the porcine skin gelatin hydrolysates obtained by Flavourzyme® (FLA) hydrolysis showed the greatest in vitro dipeptidyl peptidase IV (DPP-IV) inhibitory activity and were used for an in vivo animal experiment. PGH comprises three peptides with a molecular mass between 742.327 and 780.276, and one of the peptides had Pro as the penultimate N-terminal residue and showed DPP-IV inhibitory activity. The daily administration of PGH (300 mg/day for 42 days) was able to improve the glucose tolerance in streptozotocin-induced diabetic rats at days 21 and 42. After 42 days of treatment, the plasma DPP-IV activity was inhibited, and the glucagon-like peptide-1 (GLP-1) and insulin levels increased, accompanied by an insignificant reduction in the glucagon content. Therefore, porcine skin gelatin has potential as a functional food for the management of type 2 diabetes mellitus.