Type 2 diabetes mellitus (T2DM) is a chronic metabolic disease, which is characterized by hyperglycemia, chronic insulin resistance, progressive decline in β-cell function, and defect in insulin secretion. It has become one of the leading causes of death worldwide. At present, there is no cure for T2DM, but it can be treated, and blood glucose levels can be controlled. It has been reported that diabetic patients may suffer from the adverse effects of conventional medicine. Therefore, alternative therapy, such as traditional Chinese medicine (TCM), can be used to manage and treat diabetes. In this review, glycyrrhizic acid (GL) and its derivatives are suggested to be promising candidates for the treatment of T2DM and its complications. It is the principal bioactive constituent in licorice, one type of TCM. This review comprehensively summarized the therapeutic effects and related mechanisms of GL and its derivatives in managing blood glucose levels and treating T2DM and its complications. In addition, it also discusses existing clinical trials and highlights the research gap in clinical research. In summary, this review can provide a further understanding of GL and its derivatives in T2DM as well as its complications and recent progress in the development of potential drugs targeting T2DM.