The invention provides a compound diabetes-treating sugar-decreasing fat-reducing preparation and preparation method thereof, wherein the preparation comprises Chinese medicinal herbs including root of Chinese trichosannthes, Dendrobium nobile, root bark of chinese wolf berry, rhizoma dioscoreae, scrophularia root, asparagus root, lilyturf root, chastetree fruit, wild chrysanthemum flower, corktree bark, butterflybush flower, cape jasmine, anemarrhena rhizome, atractylodes rhizome, pseudostellaria root, notoginseng powder, root of red rooted saliva, oldenlandia, cogongrass rhizome, radix rubiae, kudzu vine root, batryticated silkworm, pipewort, Chinese starjasmine, rhubarb horsetails, arborviate seed, smoked plum, herbaceous peony, malt, honeysuckle flower, abalone shell, oyster shell, fleece-flower root, Chinese angelica root, schisandra fruit, prepared rehmannia root, pulp of dogwood fruit, broomrape, raw astragalus root, oriental water plantain rhizome, bark of peony root, licorice root, baras camphor and pearl.