The intention of the present investigation was to develop an oral formulation for an anti-diabetic drug that not only could deliver it in the active form but also provide a sustained and controlled release profile. A biodegradable poly(vinyl alcohol) (PVA) and sodium alginate (NaAlg) electrospun composite nanofiber based transmucosal patch was developed and the anti-diabetic drug insulin was loaded in it by active loading. The drug entrapment in the composite nanofibers during the processing was confirmed by scanning electron microscopy, atomic force microscopy, X-ray diffraction and Fourier transform infrared spectroscopy. The in vivo studies were carried on male Wistar rats by the sublingual route. The mucoadhesive strength results confirmed that the drug loaded PVA–NaAlg nanofiber patch had the highest strength among the PVA, PVA–NaAlg and drug loaded PVA–NaAlg samples, due to its higher water holding capacity. The in vitro activity provided a sustained and controlled release pattern of the drug from the nanofiber patch. In vivo activity validated the fact that insulin was delivered in its active state and showed appreciable results when compared to the commercial formulation. The insulin release follows first order kinetics followed by an initial burst release necessary to produce the desired therapeutic activity. Furthermore an encapsulation efficacy of 99% of the experimental formulation provides sufficient indication that the composite nanofibers serve as an ideal carrier for the delivery of insulin via the sublingual route. Thus the present investigation gives impetus to work in the direction of delivering anti-diabetic drugs (proteins and peptides) via the oral route using electrospun composite nanofiber transmucosal patches.