The invention relates to a Chinese medicinal composition for treating insomnia and palpitation and a preparation method thereof. The Chinese medicinal composition is prepared from radix pseudostellariae, processed rhizoma polygonati,calcined dragon bone and oyster shell, albizia flower, caulis polygoni multiflori, ophiopogon root, honey-fried astragalus mongholicus, radix curcumae, fried goldthread root, the fruit of Chinese magnoliavine, cedar jujube kernel, cortex albizziae and magnetite according to a certain ratio through compatibility. The Chinese medicinal composition disclosed by the invention can warm the water viscus, benefit qi and strengthen physical strength, supplement deficiency of the liver and kidney, benefit qi and strengthen the middle warmer, quiet heart and calm nerves, benefit qi and promote salivation, eliminate dampness and clear heat, purge fire to eliminate toxin, relieve muscular spasm and tranquilize the mind, arrest sweating and secure essence, has an obvious curative effect of treating insomnia, epersalgia, hyperhidrosis, body pain caused by blood insufficiency, convulsions, kidney deficiency and essence depletion, aching lumbus and limp legs, dizzy of the head and dim of sight, tinnitus, malaise, melancholy, palpitation, depressed emotion and chest stuffiness, amnesia and the like and has no side effects. Moreover, oral liquid, capsules, tablets or pills are convenient to carry and are suitable for people who go on a business trip, go on a trip and the like to use.