The invention provides a traditional Chinese medicine for treating pulmonary cyst, pulmonary fibrosis and relieving cough and the preparation method thereof, which relates to the technical field of traditional Chinese medicines. The active ingredients of the traditional Chinese medicine consist of the following materials comprising platycodon root, fritillaria, Chinese angelica, bitter orange, mulberry root bark, fourstamen stephania root, liquoric root, bulbus lilii, membranous milkvetch root, radix stemonae, lucid ganoderma, peppermint, loquat leaf, semen coicis, root of American ginseng and dandelion respectively, the weights of which are equal to each other and range from 25 to 35g. In the method, the traditional Chinese medicines with active ingredients are taken as the raw materials, which are mixed and crushed to 100 to 300 meshes to obtain traditional Chinese medicine powder; wherein, the powder is added with bee honey to be made into traditional Chinese medicine honey pills with a specification of 6 to 10g/pill or added with water to be made into traditional Chinese medicine water pills with a specification of 3 to 5g/pill. The medicine is suitable for patients with the pulmonary cyst, the pulmonary fibrosis and the cough. Either one honey pill or one water pill can be taken orally before breakfast, lunch and supper everyday, with good curative effect, short treatmentcourse, low dose, and low cost.