Abstract: A method of preparing a Chinese medicine for treatment of diabetes, the medicine including the Radix Rehmanniae Preparata, prepared Asiatic Comelian Cherry fruit, tree peony bark, Common Yam Rhizome, Indian bread, Oriental Waterplain rhizome, and refined edible vegetable oil. The tree peony bark is distilled and its residue, the Radix Rehmanniae Preparata, the Common Yam Rhizome and the Indian bread are decocted, then paeonol mother liquor is added to obtain extractum I by centrifugation and concentration. The prepared Asiatic Comelian Cherry fruit and the Oriental Waterplain rhizome are extracted in the refluxing alcohol and concentrated to obtain extractum II. The two extractum are mixed and concentrated to the thick paste; the thick paste is dried, crushed and sifted. The refined paeonol is crushed and added to the extractum powder. The mixed powder is combined with vegetable oil, milled and sifted. The fine powder is made into soft capsule.