Gastric precancerous lesions (GPLs) are an essential precursor in the occurrence and development of gastric cancer, known to be one of the most common and lethal cancers worldwide. Traditional Chinese medicine (TCM) has a positive prospect for the prevention and therapy of GPL owing to several advantages including a definite curative effect, fewer side effects compared to other treatments, multiple components, and holistic regulation. Despite these characteristic advantages, the mechanisms of TCM in treating GPL have not been fully elucidated. In this review, we summarize the current knowledge with respect to herbal formulations and the therapeutic mechanisms of TCM active ingredients for GPL. This paper elaborates on the mechanisms of TCM underlying the prevention and treatment of GPL, specifically those that are linked to anti-H. pylori, anti-inflammation, antiproliferation, proapoptotic, antioxidation, antiglycolytic, and antiangiogenesis effects.