Yinchenhao Decoction (YCHD) is a classic traditional Chinese medicine (TCM) formula composed of three botanical drugs: Artemisia capillaris Thunb, Gardenia jasminoides Ellis, and Rheum palmatum L. In modern research, it has demonstrated promising therapeutic effects against various diseases, including obstructive jaundice (OJ), hepatitis, liver cirrhosis, and hepatic carcinoma. From the perspective of TCM theory, YCHD possesses the properties of clearing heat and detoxifying as well as promoting diuresis to resolve jaundice, and is commonly used for the treatment of “damp-heat type” jaundice, particularly OJ. This article reviews the efficacy, main active metabolites, and pharmacokinetic characteristics of YCHD as an adjuvant therapy for OJ, and analyzes in depth its multi-target mechanism of action, such as regulating bile acid (BA) metabolism, reducing liver cell damage, exerting anti-inflammatory effects, and regulating metabolic processes. Furthermore, it proposes reference suggestions for improving the practical application of YCHD from both basic research and clinical research perspectives.