Objective:To observe the clinical efficacy of No.1 Tangshen Decoction combined with routine therapy of western medicine in treating diabetic nephropathy of stage Ⅲ with syndrome of qi-yin deficiency. Methods Sixty patients of stage Ⅲ diabetic nephropathy with syndrome of qi-yin deficiency were randomly divided into the treatment group and control group,30 cases in each group. Both groups were treated with routine therapy of western medicine,and the treatment group was treated with No.1 Tangshen Decoction additionally,with a course of 3 months. The clinical efficacy was observed,and the changes of TCM syndrome score,urinary albumin excretion rate (UAE),serum creatinine (Scr),glycosylated hemoglobin (HbA1c),fibrinogen degradation products (FDP),total cholesterol (TC) and triacylglycerol(TG)were compared.  Results: ①The clinical total effective rate was 86.67% in the treatment group and 60.00% in the control group. The clinical efficacy of the treatment group was significantly better than that of the control group(P<0.05). ②For the comparison of the difference of TCM syndrome score between treatment before and after,there was statistically significant difference between the two groups. The improvement on TCM syndrome score in the treatment group was more significant than that in the control group(P<0.05). ③After treatment,there were statistically significant differences on the levels of UAE,TG and FDP between the two groups(P<0.05).  Conclusion: No.1 Tangshen Decoction can improve the clinical symptoms of patients of stage Ⅲ diabetic nephropathy with syndrome of qi-yin deficiency,and decrease the urinary microalbumin. Its mechanism may be related to regulating lipid metabolism and improving renal hemodynamics.