In the study, the researchers found that patients using the herbal treatment had to rely less on conventional medicines, and that it improved the quality of life for young patients with atopic eczema.
However, UK experts have warned that patients must consult a doctor before taking herbal remedies.
For the study, the researchers examined the effects of the 'pentaherbs formulation' on patients with atopic eczema - the most common type of the disease, which affects at least one in ten kids.
The capsules has five raw herbs based on a widely used ancestral Chinese concoction - Flos lonicerae (Japanese honeysuckle), Herba menthae (peppermint), Cortex moutan (root bark of peony tree), Atractylodes Rhizome (underground stem of the atractylodes herb), Cortex phellodendri (Amur cork-tree bark).
The researchers gave 85 patients either the medicine, or a placebo and found that those who took the medicine reported improved quality of life by a third, while those who took the placebo reported no improvement.
They also found that the herbal treatment reduced patients' needs for the traditional remedy of topical steroids by an average of four days a month, as compared to just one day a month in the placebo group.
Besides this, the researchers also found that patients who took the herbal treatment showed lower blood levels of four proteins thought to have inflammatory effects linked with eczema.
The results were confirmed in lab tests, where the pentaherbs formulation was added to blood cells in a test tube.
"These early studies show that children with atopic eczema may benefit from a specific concoction of traditional Chinese herbs, which could eventually pave the way for this remedy to find its way into mainstream medicine," BBC quoted Nina Goad, of the British Association of Dermatologists, as saying.
"However, we would warn against using Chinese herbal medications without first speaking to your doctor.
"Some retailers may not be reputable and the product they sell you may be of a low standard or could contain harmful ingredients," Goad added.
The study is reported in the British Journal of Dermatology.