This study aims to investigate the effects of astragalus polysaccharide (APS) on diabetic retinopathy through the SHH-Gli1-AQP1 pathway. The anti-type 2 diabetes mellitus (T2DM) targets of APS were identified through comprehensive searches of drug and disease-related databases. A protein-protein interaction network was then constructed, followed by GO and KEGG enrichment analyses. Molecular docking simulations were performed to evaluate the interactions of APS and metformin with Gli1 and AQP1. An in vivo T2DM rat model was established via streptozotocin (STZ) injection and treated with metformin and varying doses of APS for 12 weeks. Histological changes in retinal cells were assessed using H&E and PAS staining. The expression levels of AQP1, Gli1, and SHH in the retina were measured using immunohistochemistry, Western blotting, immunofluorescence, and ELISA. Additionally, mRNA expression of AQP1, Gli1, and SHH was quantified by RT-qPCR. Bioinformatic analyses indicated that Gli1 and AQP1, key components of the SHH-Gli1- AQP1 signaling pathway, may be associated with T2DM. Subsequent experiments demonstrated that the STZ-induced T2DM rats exhibited significant retinal damage, which was notably mitigated by both APS and metformin treatments. Furthermore, the SHH-Gli1-AQP1 signaling pathway was found to be overactivated in STZ-induced T2DM rats. Treatment with APS and metformin significantly reduced the elevated expression levels of SHH, Gli1, and AQP1. APS effectively inhibits retinal damage of STZ-induced T2DM rats by restraining the SHH-Gli1-AQP1 signaling pathway.