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Type 2 diabetes mellitus (T2DM) is a global disease threatening human health. Regulating blood glucose homeostasis is a key strategy for the treatment of T2DM. In recent years, animal skin-derived hypoglycemic peptides (ASHP) have been proven to effectively regulate blood glucose homeostasis in T2DM, demonstrating significant application potential. Low-value animal skins are the main by-products of food processing, and sustainable development highlights the importance of their high-value utilization. This review summarizes the recent advances in ASHP preparation. It discusses the structure-activity relationships between ASHP and blood glucose regulatory target enzymes, and analyzes the multi-level regulatory mechanism of ASHP on blood glucose homeostasis in T2DM. Unique Gly-Pro-Y sequence structure of animal skin collagen is the key factor that makes it suitable for preparing highly active ASHP. After high-temperature hot water extraction of collagen from animal skin, combining with physical pretreatment techniques can significantly improve the hydrolysis efficiency of collagen. Selecting appropriate enzymes for specific animal skin is crucial for preparing highly active hypoglycemic peptides. Artificial intelligence prediction combined with peptide sequence structural characterization analysis is a crucial strategy for screening highly active ASHP. Competitive inhibitory type of ASHP with the Gly-Pro-Y sequence structure exhibit potent inhibitory activity against α-glucosidase and dipeptidyl peptidase-IV, thereby demonstrating excellent hypoglycemic activity. ASHP can regulate blood glucose homeostasis in T2DM through multiple pathways, among which improving insulin resistance plays a key role. This review provides prospective insights into the high-value utilization of animal skins and the effective prevention and control of T2DM.