Diabetes mellitus (DM) is a metabolic disorder that can be categorized mainly into type 1 and type 2. Diabetes type 1 is caused due to β-cell destruction, whereas type 2 is caused by the resistance of cell receptors. Many therapies are available for the management of diabetes, but they have some side effects, and as a result of this, people are attracted to natural treatments. Pleurotus mushrooms are well documented for their medicinal attributes and their role in the treatment of diseases like cancer, infectious disease, neurodiseases, and inflammatory disease. The protective mechanism of the Pleurotus fossulatus (P. fossulatus) mushroom and its detailed histological study on kidneys and the liver in diabetic conditions were unexplored. The present study evaluated the effects of P. fossulatus aqueous extract on histological changes in the diabetic rat model. Male Wistar albino rats were used to create the diabetic model by using streptozotocin (STZ) intraperitoneal (IP) injection. The animals were separated into five different groups, with six animals in each. Only group I, animals that did not receive STZ, was considered a normal control. Group II was a diabetic control and received normal saline, and group III was a drug control and received metformin as a standard drug. Groups IV and V were dosing groups, which received the aqueous extract of P. fossulatus in 250 mg/kg and 500 mg/kg of body weight concentrations, labeled as T1 and T2 groups, respectively. The T1 and T2 groups clearly showed their potential to reverse the histopathological changes in the kidney and liver. However, the T2 group was more effective than the T1 group, as results indicate that functions of the glomerulus and its structural deformity were restored to their near-natural form in the T2 group. In the case of the liver, the histological changes like the dilatation of sinusoids, more numbers of the Kupffer cell formation, and necrosis were restored in the T2 group. All these results proved the potential of P. fossulatus against the side effects of diabetes. It could protect the organs from developing diabetic nephropathy (DN) and liver-related diseases like cirrhosis and nonalcoholic fatty liver disease (NAFLD).