There has been considerable interest in traditional Chinese herbal therapy (TCHT) as a new treatment for atopic dermatitis. To establish the efficacy and safety of this treatment, a daily decoction of a formula containing ten herbs that has been found to be beneficial in open studies was tested in a double-blind placebo-controlled study. 40 adult patients with longstanding, refractory, widespread, atopic dermatitis were randomised into two groups to receive 2 months' treatment of either the active formulation of herbs (TCHT) or placebo herbs, followed by a crossover to the other treatment after a 4-week washout period. The main outcome measures were extent and severity of erythema and surface damage as judged by standardised body scores. The patients' own assessments of the overall response to treatment were also sought. The geometric mean score for erythema at the end of active treatment was 12.6 (95% confidence interval [CI] 5.9 to 22.0) and at the end of the placebo phase was 113 (65 to 180). The geometric mean score for surface damage was 11.3 (5.8 to 21.8) and 111.0 (68 to 182), respectively. The 95% CI for the mean geometric ratio for the two values with active treatment was 0.04 to 0.22 for erythema (p less than 0.0005) and 0.04 to 0.27 for surface damage (p less than 0.0005). Of the 31 patients who completed the study and expressed a preference, 20 preferred that phase of the trial in which they received TCHT whereas 4 patients preferred placebo (p less than 0.02). There was a subjective improvement in itching (p less than 0.001) and sleep (p less than 0.078) during the TCHT treatment phase. No side-effects were reported by the patients although many commented on the unpalatability of the decoction. TCHT seems to benefit patients with atopic dermatitis. Palatability of the treatment needs to be improved and its safety assured.