Aim This study aimed at evaluating whether thyroid hormone treatment could improve glycaemia and insulin response in alloxan‐induced diabetic rats by altering cytokine expression in the skeletal muscle and epididymal white adipose tissue (eWAT) as well as altering inflammatory cell infiltration in eWAT. Methods Diabetes mellitus (DM) was induced in male Wistar rats by alloxan injection, and a subset of the diabetic rats was treated with T3 (1.5 μg per 100 g body weight) for a 28‐day period (DT3). Cytokines were measured in serum (MILIplex assay kit) as well as in soleus and EDL skeletal muscles and eWAT by Western blotting. Thyroid function was evaluated by morphological, molecular and biochemical parameters. Cardiac function was assessed by measuring heart rate, blood pressure, maximal rate of pressure development (dp/dtmax) and decline (dp/dtmin) as well as the contractility index (CI). Sixty rats were used in the study. Results Diabetic rats exhibited decreased thyroid function and increased inflammatory cytokines in serum, soleus muscle and eWAT. T3 treatment decreased glycaemia and improved insulin sensitivity in diabetic animals. These alterations were accompanied by decreased TNF‐alpha and IL‐6 content in soleus muscle and eWAT, and inflammatory cell infiltration in eWAT. T3 treatment did not affect cardiac function of diabetic rats. Conclusions The present data provide evidence that T3 treatment reduces glycaemia and improves insulin sensitivity in diabetic rats, and that at least part of this effect could result from its negative modulation of inflammatory cytokine expression.