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Diabetes is a chronic medical disorder caused by insufficient production of the hormone insulin by the pancreas. Although there are various treatment options available for controlling diabetes, including non-peptide-based medications, the majority of these have adverse effects and are limited in comparison to peptide-based drugs. Protein drugs offer numerous benefits, including weight loss, significant reductions in blood glucose levels, and an extremely low risk of hypoglycemia. This article discusses treatment modalities, presents existing therapies, provides an in-depth comparison of peptide-based and other drugs, examines current development and barriers, offers some recommendations, and outlines future research directions for peptide drugs in the treatment of T2DM. In recent days, several computational tools and AI models, including ESMFold, ProteinMPNN, Schrödinger, and AutoDock Vina, have played an essential role in peptide-based drug discovery. Therefore, this article also highlights the significance of AI drug discovery, diverse AI models, and other computational tools to enhance peptide-based drug discovery and development.