China is the country possessing the largest amount of trade and consumption of medicinal plants in the world. Research and application of gene engineering on medicinal plants are the one of the most promising ways to increase the productivity and quality of medicinal plants, reduce the resource stress, and enhance the competitive power and sustainable development ability of the medicinal plants industry. In spite of the great progress in research and application of plant gene engineering worldwide, the research of gene transformation has mostly been conducted on some model plants, and the application of transgenic plant has been limited to a few staple and important crop species. For medicinal plants, recently the researches of gene transformation has emerged, however, compared with other crop and economic plants, it is still a very limited amount. On the basis of a general introduction of application of transgenic plants, this paper focuses on the present situation of the research and application of gene engineering on medicinal plants, to put forward the problems in this field, and give a prospect for its development.