The invention discloses a compressed traditional Chinese medicinal cake, which comprises an outer packing bag and one or more lumps which are sealed in the outer packing bag and obtained by compressing single traditional Chinese medicinal material and the cross sections of which are in optional geometrical shapes. The single traditional Chinese medicinal material is selected from the traditional Chinese medicinal materials of herbs, leaves, flowers or fungi and also comprises part of the traditional Chinese medicinal materials of fruits, roots and rootstalks suitable to be compressed for molding. The invention further discloses a preparation method of the compressed traditional Chinese medicinal cake, which mainly comprises: selecting and processing the single traditional Chinese medicinal material, sterilizing, airing, compressing and molding, drying, and packing under vacuum or by filling nitrogen gas. In addition, the invention further discloses the application of the compressed traditional Chinese medicinal cake in dispensing traditional Chinese medicines. The compressed traditional Chinese medicinal cake in the invention has the advantages of beautiful appearance, convenient transport and use, favorable storage of medicinal materials, and scientific and convenient dispensing.