The invention discloses a novel Chinese medicinal composition for treating renal cyst diseases and a preparation method thereof. The Chinese medicinal composition mainly comprises the following raw material medicaments: mix-fried pangolin scales, tangerine peel, Chinese angelica, immature bitter orange, common burreed rhizome, zedoary, turmeric root-tuber, peach seed, safflower, turtle shell, tortoise plastron, Szechuan lovage rhizome, red paeony root, dragon's blood, Chinese eaglewood, green tangerine peel, root of red-rooted salvia, Indian buead, oriental waterplantain rhizome, cortex lyciiradicis, amur corktree bark, gardenia, Vietnamese sophora root, raw rehmannia root, liriope, coridius, nutgrass galingale rhizome, medicated leaven and plantain seed. The Chinese medicinal composition can be prepared into any common oral preparation by the conventional Chinese medicinal preparation method. The Chinese medicinal composition can obviously improve symptoms such as renal cyst, polycystic kidney, extensive abdominal edema, uroclepsia, hematuria, albuminuria, urinary tract infection, malaise, loss of appetite, dreaminess, insomnia, amnesia and the like. The Chinese medicinal composition has the advantages of exact clinical effects, obvious curative effect, quick response, low cost, basically no toxic or side effects and the like because the Chinese medicinal composition basically combines medicaments having homology of medicament and food specified in national formulary.