Chinese herbal medicine, as a huge and diverse population, is rich in flavonoids, volatile oils, organic acids, terpenoids, alkaloids, and polysaccharides. Polysaccharides are the most important active ingredient in Chinese herbal medicine. Many studies have confirmed that Chinese herbal medicine polysaccharides (CHMPs) have antioxidant, anti-inflammatory, anti-aging, anti-tumor, hypoglycemic, hypolipidemic, regulating intestinal flora, improving immunity, and other biological activities. Obviously, CHMPs have good development potential and application prospects in the fields of biomedicine, food, and health products. However, different extraction and purification methods have a certain impact on the structure of CHMPs, and structure is closely related to its functional characteristics. Hence, a systematic review of the research progress and future prospects of CHMPs is necessary to promote their better understanding. In this paper, current knowledge on extraction, separation, and purification methods, chemical characterizations, and biological activities of CHMPs are summarized. This review provides an important theoretical reference for the further development and utilization of natural polysaccharides.