Introduction: Diabetes mellitus is on alarming rise in India. Drug utilization studies help to identify the adherence to standard treatment guidelines and to evaluate the rational drug usage. Objective: To study prescription pattern, calculate the cost of antidiabetic drugs and to evaluate the adherence to treatment guidelines in diabetic patients attending the medicine outpatient department in a tertiary care teaching hospital. Materials and Methods: A prospective observational study was carried out for a period of 5 months. The diabetic patients who visited the medicine outdoor department were included. Demographic data and complete prescription details were recorded in the structured case record form. Cost of the drug therapy was calculated from the patient’s bills. Indian Council for Medical research guidelines-2005 for diabetes management was used to evaluate the adherence. Results: A total of 250 patients were enrolled in the study with mean age 57.91 ± 9.37. Out of 250 patients 126 (50.4%) were male and rest were female. A total of 1,391 drugs were prescribed, with mean of 5.56 ± 2.52 drugs and out of which 539 drugs were antidiabetics with mean of 2.18 ± 0.96. In monotherapy, metformin was frequently 218 (40.45%) prescribed. Glimepiride and metformin was the most frequently prescribed in 119 (76.28%) out of 156 antidiabetic drug combinations. Most commonly used drugs other than antidiabetics were aspirin 146 (18.9%) and atorvastatin 119 (15.41%). Mean cost of therapy for a month for a diabetic patient was 354.60 ± 305.72 INR. Majority 209 (83.6%) of prescriptions was in accordance to guidelines. Conclusion: Metformin was the most frequently prescribed drug in the diabetes patient. Metformin and glimeperide being the most frequent combination used. Majority of the prescriptions followed standard guidelines.