Traditional Chinese medicine (TCM) has undergone a long history of clinical practice, which can arrive at ideal therapeutic effects by regulating the body's overall function. However, the complex nature of TCM determines a difficult study on the mechanism and material base of TCM. The current investigations of TCM indicate that the development of modern biotechnology will offer a strong arm in the process of the study. This review focused on the application of the modern biotechnology, including transgenic, gene knockout, cell membrane chromatography (CMC), molecular biochromatography (MBC), gene chips, proteomics, etc. in the research of pharmacodynamic effects of TCM at levels of whole animal, cell and molecular models over the past decade. The whole animal models established by the transgenic and gene knockout technology can truly reflect the characteristics of the target gene activity. Thereby the created animal model could share the pathology of maximum degree of approximation. Cellular models are especially suitable for the situation that functional proteins, enzymes, or drug targets are difficult to separate, or the characteristics of the drugs are unidentified. The utilization of MBC can not only achieve high-throughput screening, but also directly detect the chemical composition of the active components relative to the receptors. Based on the remarkable progress of genomics and proteomics and the technique of gene chips, the bioactive components of TCM can be screened through observing the changes of genes or proteins before and after the compounds acting on the cells.