The invention discloses a traditional Chinese medicine for treating Alzheimer disease as well as a preparation method and application thereof. The traditional Chinese medicine comprises the following components in parts by mass: 15 parts of codonopsis pilosula, 15 parts of astragalus mongholicus, 12 parts of rhizoma polygonati, 6 parts of polygonum multiflorum, 10 parts of curcuma aromatica, 8 parts of rhizoma acori graminei, 10 parts of ligusticum wallichii and 8 parts of earthworm. The method comprises the following steps of: adding the curcuma aromatica, the rhizoma acori graminei and the ligusticum wallichii into deionized water, heating for distilling and extracting volatile oil, dehydrating the volatile oil, clathrating with beta-cyclodextrin and drying at low temperature; collecting a distilled water solution with another vessel, adding the codonopsis pilosula, the astragalus mongholicus, the rhizoma polygonati, the polygonum multiflorum and earthworm into water, decorating, mixing decoctions, filtering to obtain filtrate, mixing the filtrate with the distilled water solution, concentrating to obtain concentrate, adding 95% ethanol to the concentrate to ensure that the alcohol precipitation concentration is 60%, fully stirring, standing for 24-48 hours, filtering to obtain filtrate, recovering ethanol from the filtrate, concentrate the filtrate subjected to ethanol removal to form thick paste and performing microwave drying on the thick paste to form a dry extract; and crushing the dry extract, adding a defined amount of dextrin or starch, performing wet granulation, drying and granulation, adding a volatile oil clathrate compound and uniformly mixing. By adopting methods of invigorating spleen and kidney, eliminating phlegm and dispersing blood stasis, the brain premature senility and brain aging are prevented and intervened, thereby delaying the development of the Alzheimer disease, improving the clinical symptoms and improving the life quality of patients.