Insomnia is a serious worldwide health problem that is often comorbid with anxiety. The purpose of the present study was to evaluate the efficacy of a Chinese formula containing Suan Zao Ren Tang (SZRT) and Zhi Zi Chi Tang (ZZCT; SZR-ZZC) for improving sleep quality and anxiety states with four indices of Polysomnography (PSG), the Insomnia Severity Index (ISI), the Pittsburgh Sleep Quality Index (PSQI), and the Self Rating Anxiety Scale (SAS). Methods. A randomized, parallel-controlled trial compared SZR-ZZC to lorazepam tablet in insomniacs with anxiety. Patients were randomized to the SZR-ZZC treatment group (n = 60) and the lorazepam tablet treatment group (n = 59). Results. SZR-ZZC significantly improved scores on all four treatment indices. Compared with lorazepam, treatment with SZR-ZZC resulted in a significant reduction in the ISI (P = 0.029), the PSQI (P = 0.017), and wake after sleep onset (WASO; P = 0.008) scores and improved sleep architecture (P = 0.000-0.003) after a 4-week treatment period. Only one subject in the SZR-ZZC group experienced adverse side effects. Conclusion. Treatment with SZR-ZZC for 4 weeks appears to be a relatively safe and effective complementary therapeutic option when aiming to improve sleep quality and anxiety in insomniacs with anxiety.