The present study assessed aqueous and ethanolic extracts of Berberis aristata fruit for their antioxidant, antimicrobial, antidiabetic, and cytotoxic characteristics. The fruit extract was then applied as a natural preservative and colorant in yogurt to enhance the physiochemical, sensory, and antioxidant properties. The results indicated that B. aristata fruit extract (BAFE) has a higher phenolic content than aqueous extract, indicating significant antioxidant and antidiabetic properties. Moreover, BAFE exhibited significant antimicrobial activity against food-borne pathogens and considerable cytotoxicity against intestinal cancer cell lines (Caco-2 cells). The dietary BAFE enhanced rats' body weight gain and exhibited normal alanine transaminase, aspartate aminotransferase, glucose, and malondialdehyde levels. Upon the application of BAFE during storage, the pH of the BAFE yogurt decreased, but the concentrations of lactic acid, total soluble solids, and fat increased. The BAFE improved the water holding capacity, enhancing the viscosity and the texture properties. Malondialdehyde levels decreased in yogurt supplemented with BAFE due to the significant antioxidant properties of BAFE. The BAFE enhanced color parameters, such as lightness (L∗) and redness (b∗), as well as the sensorial trait, especially the yogurt color. The lactic acid bacteria count was sustained in the control yogurt. In conclusion, adding BAFE at 100, 300, and 500 μg/g to yogurt ingredients can improve yogurt's quality and shelf life.