Methimazole is a widely used antithyroid agent. Although methimazole is generally well tolerated, rare but severe cholestatic jaundice may occur. We described a 74-year-old woman who had a 10-year history of type 2 diabetes had developed severe jaundice and itching 1 month after receiving methimazole (10 mg tid) and propranolol (10 mg tid) for the treatment of hyperthyroidism. Clinical investigations revealed no evidence of any mechanical obstruction in the common bile duct or other obvious causes of hepatic injury, and the diagnosis methimazole-induced cholestasis was made on the basis of the temporal relationship between initiation of methimazole and onset of cholestasis. Methimazole was hence discontinued. However, the patient experienced a progressive worsening in cholestasis after receiving 2 weeks of ursodeoxycholic acid (UDCA) therapy. Prednisone therapy was then attempted. Liver function tests eventually improved with combination of glucocorticoids and ursodeoxycholic acid therapy. This case clearly showed that glucocorticoids could be a possible additional way of treatment for some cases of drug-induced cholestatic jaundice even in diabetic patients.