Given the significant role of inflammation during various diseases, the anti-inflammatory mechanism of Chinese herbal medicine through the cholinergic anti-inflammatory pathway (CAP) is being developed from basic research to clinical application in inflammatory diseases. CAP is a neuro-immunomodulatory pathway that exerts a more rapid and efficient response to systemic inflammatory responses, providing new directions for the research and treatment of inflammatory diseases. Chinese herbal medicine prescriptions, single herb, extracts, and components exhibited significant anti-inflammatory and immunomodulatory effects through CAP for the treatment of sepsis, acute lung injury, COVID-19, Alzheimer’s disease, etc. The present article comprehensively and systematically reviewed the anti-inflammatory mechanisms of CAP. Simultaneously, its related pathways such as JAK2/STAT3 and NF-κB were listed. The role of CAP in various inflammatory diseases and Chinese herbal medicine mechanism through CAP was also summarized. The purpose of this article looks forward to providing new targets and perspective for treatment of inflammatory diseases.