The G protein-coupled receptor TGR5 is a membrane receptor for bile acids. Its agonism increases energy expenditure and controls blood glucose through secretion of glucagon-like peptide-1 in enteroendocrine cells. In this study, we explored the therapeutic potential of WB403, a small compound activating TGR5 which was identified by combining TGR5 targeted luciferase assay and active GLP-1 assay, in treating type 2 diabetes. After confirmation of TGR5 and GLP-1 stimulating activities in various cell systems, WB403 was examined in oral glucose tolerance test, and tested on different mouse models of type 2 diabetes for glycemic control and pancreatic β-cell protection effect. As a result, WB403 exhibited a moderate TGR5 activation effect while promoting GLP-1 secretion efficiently. Interestingly, gallbladder filling effect, which was reported for some known TGR5 agonists, was not detected in this novel compound. In vivo results showed that WB403 significantly improved glucose tolerance and decreased fasting blood glucose, postprandial blood glucose and HbA1c in type 2 diabetic mice. Further analysis revealed that WB403 increased pancreatic β-cells and restored the normal distribution pattern of α-cell and β-cell in islets. These findings demonstrated that TGR5 activator WB403 effectively promoted GLP-1 release, improved hyperglycemia and preserved the mass and function of pancreatic β-cells, whereas it did not show a significant side effect on gallbladder. It may represent a promising approach for future type 2 diabetes mellitus drug development.