The invention discloses a new external Chinese medicinal composition for treating hydrocephalus and a preparation method thereof. The Chinese medicinal composition mainly comprises the following raw material medicaments: szechuan lovage rhizome, grassleaf sweelflag rhizome, manchurian wildginger, incised notopterygium rhizome, fineleaf schizonepeta herb, divaricate saposhnikovia root, cassia twig, Chinese ligusticum rhizome, angelica dahurlica, kudzuvine root, flos chrysanthemi, baical skullcap root, ash bark, lightyellow sophora root, radix scrophulariae, red paeony root, giant knotweed rhizome, natural indigo, vietnamese sophora root, Indian buead, Chinese lobelia herb, cortex lycii radicis, rhubarb, akebia stem, oriental waterplantain rhizome, plantain seed, India madder root, cattail pollen, rosewood heart wood, peach seed, safflower, root of red-rooted salvia, common burreed rhizome, zedoary, ground beeltle, storax, borneol, camphor, toad venom, musk, benzoin, sandalwood, mint, pubescent angelica root, beautiful sweetgum fruit, radix stephaniae tetrandrae, glandularstalk St paulswort herb, cortex acanthopanax radicis, swordlike atractylodes rhizome, herba agastachis, cortex magnoliae officinalis, talc, manshurian dutchmanspipe stem, ricepaperplant pith, Japanese climbing rern spore, pyrrosia leaf, longhairy antenoron herb, prepared common monkshood daughter root, costustoot, cyperus rotunus, szechwan chinaberry fruit, pangolin scales and the like. The Chinese medicinal composition can be prepared into any external preparation used commonly according to the conventional method of Chinese medicinal preparations. The external Chinese medicinal composition can improve symptoms such as increased intracranial pressure, pain of bilateral tempus or whole skull, nausea, cephaloedema or optic atrophy, mental retardation, dyskinesia, phenomena from slow walk and disequilibrium to incapability of walking and finally ill-health in beds, dysphrenia and hypomnesis.