The human islet amyloid polypeptide (hIAPP) or amylin is the major constituent of amyloidogenic aggregates found in pancreatic islets of type 2 diabetic patients that have been associated with β-cell dysfunction and/or death associated with type 2 diabetes mellitus (T2DM). Therefore, developing and/or identifying inhibitors of hIAPP aggregation pathway and/or compound that can mediate disaggregation of preformed aggregates holds promise as a medical intervention for T2DM management. In the current study, the anti-amyloidogenic potential of Azadirachtin (AZD)—a secondary metabolite isolated from traditional medicinal plant Neem (Azadirachta indica)—was investigated by using a combination of biophysical and cellular assays. Our results indicate that AZD supplementation not only inhibits hIAPP aggregation but also disaggregates pre-existing hIAPP fibrils by forming amorphous aggregates that are non-toxic to pancreatic β-cells. Furthermore, AZD supplementation in pancreatic β-cells (INS-1E) resulted in inhibition of oxidative stress; along with restoration of the DNA damage, lipid peroxidation and the associated membrane damage, endoplasmic reticulum stress and mitochondrial membrane potential. AZD treatment also restored glucose-stimulated insulin secretion from pancreatic islets exposed to hIAPP. All-atom molecular dynamics simulation studies on full-length hIAPP pentamer with AZD suggested that AZD interacted with four possible binding sites in the amyloidogenic region of hIAPP. In summary, our results suggest AZD to be a promising candidate for combating T2DM and related amyloidogenic disorders.