The invention discloses a traditional Chinese medicine composition for treating anxiety and insomnia and a preparation method of the traditional Chinese medicine composition. The traditional Chinese medicine composition is prepared from, by weight, raw jujube kernels, poria cum ligno hospite, radix polygalae, fructus citri sarcodactylis, salivia chinensis, dwarf elm fruits, flos albiziae, rhizoma chuanxiong, apricot kernels, tuber fleeceflower stems, seman platycladi, semen nelumbinis, fried medulla junci, retinervus luffae fructus, retinervus citri reticulatae, fried jujube kernel, raw fructus hordei germinatus, fructus tritici levis, fructus toosendan, caulis bambusae in taenia, radix salviae miltiorrhizae, medulla tetrapanacis and periostracum cicadae. The traditional Chinese medicine composition is in a scientific and reasonable formula, has various components in synergistic compatibility, can take effect quickly, has efficacy of tranquilizing mind, calming nerves, soothing the liver, purging intense heat and the like, is capable of conditioning viscera dysfunction state, avoiding the anxiety and the insomnia, protecting patients from the anxiety and the insomnia and treating both symptoms and root causes, and is positive in efficacy, safe, convenient and free of toxic and side effects. The preparation method of the traditional Chinese medicine composition is efficient, good in active ingredient extraction effect and suitable for industrial production.