The present invention provides chitosan encapsulated curcumin nanoparticles and a process for preparation of chitosan encapsulated curcumin nanoparticles. The chitosan encapsulated curcumin nanoparticles provide improved dissolution rate and bioavailability and are effective in the treatment of diabetes, hyperglycemic conditions and the associated pathogenesis. The bioavailability of chitosan encapsulated curcumin nanoparticles proves to be effective as compared to curcumin alone.