The invention discloses a medicine for treating allergic cheilitis and a preparation method thereof. The medicine comprises the following components in parts by mass: 1-3 parts of schizonepeta spike, 1-3 parts of divaricate saposhnikovia root, 1-3 parts of peppermint, 1-3 parts of weeping forsythiae capsule, 1-3 parts of fructus gardeniae praeparatus, 1-3 parts of baical skullcap root, 1-3 parts of raw gypsum, 1-3 parts of largehead atractylodes rhizome, 1-3 parts of white paeony root, 1-3 parts of Chinese angelica, 1-3 parts of talcum, 1-3 parts of semen coicis and 1-3 parts of liquoric root. The preparation method of the medicine comprises the following steps: A, selecting highly-qualified and cleaned schizonepeta spike, divaricate saposhnikovia root, peppermint, weeping forsythiae capsule, fructus gardeniae praeparatus, baical skullcap root, raw gypsum, largehead atractylodes rhizome, white paeony root, Chinese angelica, talcum, semen coicis and liquoric root according to the mass part ratio, and respectively grinding into coarse particles for later use; and B, feeding ground particular medicines into a cloth bag, sealing the bag opening, soaking in water for 20 minutes until medicine tissues are completely soaked, then putting soaked medicines and clarified liquid for soaking the medicines into a medicine decocting machine together, injecting a proper amount of cold boiling water, decocting for 50 minutes by using strong fire firstly and using slow fire secondly, filtering 1665ml of traditional Chinese medicine liquid, and bagging and sealing.