The invention relates to a traditional Chinese medicine composition for treating alopecia and poliosis as well as a preparation method and application thereof. The traditional Chinese medicine composition comprises a preparation A and a preparation B, wherein the preparation A is prepared from the following raw materials: radix polygoni multiflori, mulberry fruit, glossy privet fruit, herba ecliptae, radix rehmanniae, angelica sinensis, cortex eucommiae, fructus psoraleae, radix astragali, rhizoma chuanxiong, rhizoma corydalis, rhizoma smilacis glabrae, rhizoma gastrodiae, herba agrimoniae and oncised notopterygium rhizome. The preparation B is prepared from the following raw materials: mulberry fruit, radix sophorae flavescentis, cortex moutan radicis, fructus crataegi, halloysitum rubrum, rhizoma alismatis and liquorice. The raw materials of the preparation A are crushed into coarse powder, then ethyl alcohol is added into the coarse powder for coldly soaking and put in sealed storage for more than two months so as to obtain a medicine liquid, and alums is added into the medicine liquid for filtering and obtaining a filtrate. The filtrate is daubed on the overall scalp for twice a day. The preparation B is decocted and taken hotly for one dose a day in two times. The traditional Chinese medicine composition disclosed by the invention has the functions of relieving exterior syndrome and clearing heat, calming liver wind, activating blood circulation and nourishing blood, activating proliferation and the like, is obvious in effect of treating alopecia and poliosis and conducive to the relief of symptoms such as anxiety, psychentonia and the like caused by alopecia and poliosis. The traditional Chinese medicine preparations of the traditional Chinese medicine composition have no toxic and side effect and are easy to take.