Traditional Chinese medicines (TCMs) have a long history in Asian countries and are traditionally used to prevent and treat a variety of diseases. The rising interest in TCMs in recent years is reflected in both the increase in their market demand as well as scientific research. Previous studies show that TCMs perform dual roles on immunological regulation: immunological activation and immunological suppression. This review highlights studies focusing on the immunomodulatory effects of TCMs, describing their stimulatory effect on immune cells, immune organs, cytokine production, tumorigenesis, as well as their inhibitory function on inflammation, allergy, autoimmune disease, and graft rejection. Components of both innate and adaptive immunity may be modulated by specific TCMs. TCMs may also have antitumor effects and may play a role in regulating apoptosis. Immunomodulatory effects of TCMs may lead to new medications to treat allergic and autoimmune diseases. More high quality studies are needed to achieve scientific validity to these potential treatments. Evidence presented in this review reveals the role of TCMs in immune regulation and proposes a promising future for them in immunomodulatory therapies.