The invention discloses a traditional Chinese medicine for treating trauma and diabetes foot ulcer and a preparation method. The medicine comprises the following raw materials in parts by mass: 1-2.5 parts of rhizoma paridis, 0.8-1.5 parts of rhizoma paridis, 0.5-1 part of rhizoma arisaematis, 0.5-2 parts of rhizoma kaempferiae, and 0.5-1 part of lithospermum. The preparation method comprises the following steps of mixing the raw materials and then grinding to 100-180 meshes, and sterilizing to obtain powder. The medicine has the functions of promoting and adjusting the circulation of qi and blood of the meridian, fighting against bacterium and diminishing inflammation, stopping bleeding and dissipating blood stasis, promoting qi and relieving pain, and clearing away heat and toxic materials, is dramatic in the effect of regenerating tissue to heal wound, rapid in wound healing, and wide in adaptation diseases, and is especially applicable to the treatment of diabetes foot ulcer, with little acne signs or scars left.