The invention provides a traditional Chinese medicine for treating schizophrenia and a preparation method thereof. The traditional Chinese medicine comprises the following raw herbal materials: cladonia fallax abbayes, berchemia lineate, uncaria rhynchophylla root, jasmine, fermented soybean, scutellaria baicalensis, square-stem, folium mori, angelica sinensis, rhizoma cyperi, semen cassia, scouring rush, dogwood, semen celosiae, pipewort, butterflybush flower, motherwort fruit, fructus trichosanthis, bamboo shavings, bamboo juice, tabasheer, magnetite, medicated leaven, keel, valerian, polygala tenuifolia, cortex albiziae, concha mauritiae arabicae, liquorice and rhizoma acori graminei. The traditional Chinese medicine has the beneficial effects that the traditional Chinese medicine disclosed by the invention adopts different properties of traditional Chinese medicinal materials, is rigorous in compatibility, can directly reach the focus of infection by treatment based on syndrome differentiation, has the effects of purging liver-fire, and removing phlegm and inducing resuscitation, is short in recovery time, not easy to reappear after recovery, small in toxic and side effects, proper in taste, easy to accept by a patient, and simple and convenient in manufacturing process; the drug is easy to manufacture and low in cost.