The invention discloses a traditional Chinese medicine composition for treating white hair and hair loss and a preparation method thereof. The traditional Chinese medicine composition comprises the following raw materials: 15 grams of herba ecliptae, 15 grams of Eucommia ulmoides, 15 grams of folium mori, 20 grams of psoralea corylifolia, 15 grams of light red Tuckahoe, 15 grams of Chinese angelica, 20 grams of Ilex kudingcha C J Tseng, 20 grams of biota orientalis, 20 grams of dried ginger, 20 grams of ginger, 30 grams of prepared fleece flower root, 30 grams of notopterygium root, 15 grams of Ligusticum wallichii, 15 grams of Artemisia argyi, 20 grams of achyranthes root, 15 grams of taxillus, 15 grams of ginseng, 15 grams of mulberry seed, 15 grams of common cnidium fruit, 60 grams of black sesame, 60 grams of black soya bean, 15 grams of Semen Cuscutae, and 20 grams of macrocarpa Nucuma. The composition of the invention is ground into a powder, the powder is then mixed with fermented rice water and then boiled along with fermented rice water or vinegar, and finally the product is applied to the affected area. By fumigating, the scalp is nourished and local insufficient blood supply of the hair follicle is improved. By absorbing the medicine through the scalp, the product performs all-directional treatment of white hair and hair loss symptoms, and also can be used to regulate the whole body and play a multi-purpose effect with one medicine.