The invention discloses a traditional Chinese medicine composition used for treating diabetic complications and reducing blood sugar. The composition comprises a formula A composed of an extract of Huidouba, an extract of euonymus alatus, an extract of balsam pear, an extract of Radix Puerariae, an extract of Sophora alopecuroide and Ganoderma broken-down wall spore powder, or comprises the formula A and a formula B which is composed of an extract of haw, an extract of banksia rose, an extract of Radix Astragali, an extract of ginseng leaves, an extract of Radix Puerariae, an extract of mulberry leaves, an extract of bighead atractylodes rhizome, an extract of Chinese angelica, an extract of Ligusticum wallichii, an extract of caulis polygoni multiflori, an extract of eucommia leaves, an extract of raw rehmannia root, an extract of epimeddium and chitosan oligosaccharide. Furthermore, the invention also provides a preparation method for the composition. The traditional Chinese medicine composition can effectively treat the complications of insomnia, gastrointestinal disorder, lower limb gangrene, ulcer, necrosis and erosion, limb numbness and pruritus, blurred vision, oral ulcer and the like caused by diabetes and can effectively reduce blood sugar.