The invention relates to a traditional Chinese medicine preparation for treatment of diabetes and a preparation method thereof. The traditional Chinese medicine preparation is prepared from the following raw materials: the effective components: lalang grass rhizome, aubergine root, astragalus, lycianthes biflora, root of hollyhock, inula flower, day lily, japanese cayratia herb, cortex fraxini, anoectochilus roxburghii, lettuce, chinese mesona herb, watermeion peel, myrtle, sophora flower and rayal jelly. The traditional Chinese medicine preparation for treatment of diabetes is made of pure traditional Chinese medicine and is made by modern advanced medicine preparation technologies. After being taken, the traditional Chinese medicine preparation for treatment of diabetes has the function of lowering blood glucose; aiming at the reasons such as deficiency of kidney and consumptive thirst, emotional disorder, indigestion in the stomach, dryness due to thermalization and the like causing the diabetes, for realizing the purposes of nourishing, soothing the liver and producing saliva, regulating vital energy and eliminating evil, the traditional Chinese medicine preparation for treatment of diabetes has the functions of eliminating phlegm by cooling, eliminating depression and consumptive thirst, and balancing dryness and moisture, the absorption effect is good, the curative effect is remarkable, and clinical verifications prove that the traditional Chinese medicine preparation for treatment of diabetes is applicable to relieving and treating the diabetes and the diabetic complication.