The invention discloses a new traditional Chinese medicine composition for treating insomnia and a preparation method thereof. The traditional Chinese medicine composition mainly comprises the following raw Chinese medicinal herbal materials: cinnabar, nacre mother of pearl, cortex albiziae, semen boitae, tuber fleeceflower stem, polygala root, amber, fossil fragments, spina date seed, glossy ganoderma, shell of abalone, oyster, gastrodia elata, root of straight ladybell, ophiopogon japonicus, lucid asparagus, fruit of Chinese wolfberry, fushen, motherwort, Chinese angelica, radix paeoniae alba, cortex lycii radicis, agilawood, root of three-nerved spicebush, rhizoma cyperi and the like. The traditional Chinese medicine composition can be prepared into any one common oral preparation according to a conventional traditional Chinese medicine preparation method. The invention can remarkably improve symptoms of insomnia, difficulty falling asleep, easy awakening, difficulty falling asleep after awakening, alternation of falling asleep and awakening, difficulty falling asleep all through the night, doldrums, slow response, fatigue, even vexation and the like, and has the advantages of accurate clinical treatment effect, remarkable treatment effect, low cost, basically no toxic or side effects, and the like.