Objective: To observe the therapeutic effect and mechanism of Naohuandan (脑还丹, NHD)in treating senile dementia (SD). Methods: Clinical study: Fifty-eight patients with SD, whose diagnosis conforms to the Diagnostic Standard of DSM-Ⅳ issued by American Association of Psychiatry, were enrolled and randomly assigned into two groups. The 30 patients in the treated group were treated with NHD, 4 capsules each time, 3 times daily. The 28 patients in the control group were treated with Piracetam, 1.6 g each time, 3 times daily. The therapeutic course for both groups was 3 months. The therapeutic efficacy was estimated and compared by comprehensive scores of memory and cognition, scores of Mini-mental State Examination (MMSE) and Activities of Daily Living (ADL). Experimental study: Rats were divided into the control group,the model group and the high-dosage and Iow-dosage NHD treated groups. The protective effect of NHD on the per-oxidative damage of hippocampal neurons in β-amyloid protein induced SD model was observed and the related criteria were determined. Results: Clinical study showed that both NHD and Piracetam could improve the clinical symptoms of patients, the two medicines showing insignificant difference in total effective rate. But NHD was better in elevating MMSE score and lowering ADL score in patients than Piracetam ( P＜0.05 and P＜0.01). Experimental study showed that (1) 24 and 72 hrs after modeling, the activity of SOD and GSH were lower and the level of MDA higher in the model group than those in the control group ( P＜0.05or P＜0.01). Compared with the model group at the corresponding time points, in the high-dosage NHD group, SOD and GSH were higher, MDA was lower ( P＜0.05 or P＜0.01); but in the Iow-dosage NHD group, SOD at the 72th hr was higher (P＜0.05) and MDA at 24th and 72th hrs was lower ( P＜0.01). And most of the criteria in the high-dosage NHD group was improved better than that in the Iow-dosage NHD group. ( 2) The survival rates of neurons in various groups were not different significantly (P＞0.05) 24 hrs after modeling, but that in the high-dosage NHD group was significantly higher than that in the model group ( P＜0.01 ) and in the Iow-dosage NHD group 72 hrs after modeling( P＜0.05). Conclusion: NHD is an effective Chinese herbal preparation for treatment of SD, and its mechanism is related with its inhibition on peroxidative injury and protection on neurons.