The invention relates to a Chinese herbal compound medicine for treating diabetes mellitus and a preparation method thereof. The Chinese herbal compound medicine is prepared from the following ingredients by weight percentage: rhizoma atractylodis, Ligusticum wallichii, ephedra, Rhizoma Dioscoreae Nipponicae, cynanchum paniculatum, pinellia ternate, inula flower, radix aconiti lateralis preparata, pepper, fructus evodiae, pharbitis seed, coptis powder, uncaria, raw liquorice, polygonum multiflorum, radices trichosanthis, rhizoma anemarrhenae, sealwort, radix ophiopogonis, Chinese yarn, the fruit of Chinese wolfberry, aloes, euonymus alatus sieb semen litchi, cornus, cortex lycii radicis, bitter gourd, ephedra, potentilla discolor, purslane, guava, fourstamen stephania root, angelica sinensis, ginseng, galangal, acanthopanax, cinnamon, burdock, radix polygonati officinalis, astragalus membranaceus, the root bark of the peony tree, peach blossom, glossy privet fruit, rhizoma alismatis, the bark of eucommia, the root of kudzu vine, five leaf gynostemma herb, china root greenbier rhizome, the root bark of white mulberry, root of common peony, parasitic loranthus, rhodiola elongate, selaginella tamariscina, ginkgo leaf, semen coicis, lychee seed, morinda officinalis and dendrobium officinale. According to the invention, the preparation method is simple, various traditional Chinese medicines are matched, the utilization rate of the medicines is high, the toxic and side effect is small, and the curative effect in the diabetes mellitus and complication thereof is remarkable, and the total efficiency reaches 92%.