This thesis focuses on the role of the nine-amino acid neuropeptide, oxytocin (C*YIQNC*PLG-NH2) in endocrine pancreatic function and the development of novel oxytocin-based peptides for the treatment of diabetes. Oxytocin possessed insulinotropic properties and an ability to lower blood glucose and suppress appetite in mice. Arginine vasopressin, the anti-diuretic hormone, differs from oxytocin in two amino acids at positions 3 and 8 (C*YFQNC*PRG-NH2). It possessed similar glucoregulatory properties as oxytocin. Both peptides have a very short circulating half-life and undergo in vitro degradation in plasma. The major work in this thesis focuses on the design of peptide analogues which are enzyme resistant with bioactivity suitable for the treatment of diabetes. These modifications were implemented at positions 1(Cys), 2(Tyr), 7(Pro), by replacing the amino acid with either a modified version of the amino acid (Ac-Cys or D-Cys) or a similar structured amino acid. Oxytocin was also modified to incorporate amino acids from vasopressin at positions 3 (Ile/ Phe) and 8 (Leu/Arg). Overall, 20 such analogues were designed and functionally characterized both in vitro and in vivo. In vitro degradation experiments performed with the analogues revealed their increased stability when incubated in plasma. Incubation of rodent and human beta cell lines with these analogues resulted in a dose-dependent glucose stimulated insulin secretion. Administration of these analogues after a glucose challenge to mice prevented a rise in blood glucose and increased plasma insulin concentrations. The prolonged effect of these analogues 2h or 4h after administration, against a glucose challenge, confirmed their enhanced stability in the circulation. Three functionally superior analogues – 2N (AcC*YIQNC*PLG-NH2), D7R ((D-C)YIQNCYLG-NH2) and Ac8RO (Ac-C*YIQNC*PRGNH2) were studied for their long term effects by twice daily adminsitration for 28 days in high fat fed mice. The analogues showed strong anti-hyperglycaemic insulinreleasing activity, enhanced insulin sensitivity with increased HDL-cholesterol and bone density comparable to exendin-4. The effect of Ac8RO, a hybrid peptide of oxytocin and vasopressin, and liraglutide in transgenic mice provided evidence of possible transdifferentiation of alpha and ductal cells into beta cells under conditions of induced stress. This research emphasizes the role of oxytocin as a template for the design of highly stable and efficient analogues that pave the path for novel peptidebased anti-diabetic therapy.