Objective: To observe the efficacy and safety of Yigu capsule (兴骨胶囊, YGC), a Chinese herbal compound preparation, in treating postmenopausal osteoporosis (PMO) and to explore its possible mechanism. Methods: The clinical study was conducted in a prospective, randomized, double blinded method lasting for 6 months with placebo and positive control. Two hundred and ten PMO patients with confirmed diagnosis were assigned into the YGC group, the calciferol group and the placebo group. Besides being administered element calcium, they were treated with YGC, calciferol capsule and placebo capsule respectively. And such symptoms as newly found fracture and ostealgia, bone mineral density (BMD) of the 2nd-4th lumbar vertebrae (L2-4) and upper femur, blood and urinary indexes for bone metabolism, sex hormone level and adverse reaction that occurred in patients were observed. Results: In the YGC group, the total effective rate was 95.50%, with no new occurrence of fractures, which was significantly better than that in the other two groups ( P＜0.05). Moreover, in the YGC group, the increase rate of BMD was 9.83 % in L2-4, 4.09 %in femoral neck, 4.60% in Wards triangle, 3.00% in greater trochanter, which was also better than that in the placebo group ( P＜0.05, P＜0.01). As compared with the placebo group, levels in the YGC group of urinary oxyproline hydroxyproline/creatinine, urinary calcium/creatinine were significantly lower, serum and bone alkaline phosphatase, osteocalcin, estradiol and estradiol/testosterone were significantly higher, but no difference was shown in the comparison of testosterone level. In the observation period, no abnormality in blood or urine routine, liver or renal function was found. Only mild, transient gastro-intestinal response occurred in individual patients, but it did not affect the treatment. Conclusion: YGC could treat PMO effectively, as it could obviously increase the BMD of lumbar vertebrae and coxafemoral bone, elevate the alleviating rate of ostealgia and incessant motion time, yet causing no newly found compressive fracture of vertebrae, or and any related adverse reaction. YGC could not only promote the formation, but also inhibit the absorption of bone as well as increase the sex hormone level. Therefore, it is a pure Chinese herbal compound preparation worthy of further research and development.