The invention relates to a traditional Chinese medicine composition for treating diabetic nephropathy. The traditional Chinese medicine composition is prepared from the following raw material medicines in parts by weight: 25-35 parts of astragalus membranaceus, 15-25 parts of cordyceps cicadae, 8-12 parts of taxus chinensis, 1-5 parts of saffron, 10-15 parts of Chinese wolfberry, 10-20 parts of lucid ganoderma, 15-25 parts of radix puerariae, 15-25 parts of gynostemma pentaphylla, 10-20 parts of wine-treated rhubarb and 3-9 parts of liquorice. The invention further provides an application of the traditional Chinese medicine composition. The traditional Chinese medicine composition disclosed by the invention has a very good protection effect on the kidney of a rat with diabetic nephropathy,and can effectively reduce kidney weight index, blood sugar, serum creatinine and urea nitrogen, reduce proteinuria and improve pathological injury of kidney tissues of the rat with diabetic nephropathy. According to the application disclosed by the invention, the effects of reducing proteinuria and protecting kidneys are achieved by down-regulating the expression of TGF-beta1, p-Smad2, p-Smad3 and alpha-SMA proteins in kidney tissues of DN rats.