Diabetic kidney disease (DKD) is a major microvascular complication of diabetes and has become the leading cause of mortality among individuals with diabetes and end-stage renal disease. Ferroptosis is a novel form of programmed cell death characterized by the excessive accumulation of iron-dependent lipid peroxides, playing a key driving role in the occurrence and progression of DKD. Recent studies have shown that during the onset and progression of DKD, mechanisms such as inducing iron metabolism disorder, inhibiting the System Xc?/GPX4/GSH antioxidant pathway, and triggering lipid peroxidation bursts promote ferroptosis in intrinsic kidney cells (including renal tubular epithelial cells, podocytes, and mesangial cells), thereby accelerating the process of kidney injury. Traditional Chinese medicine (TCM) has the advantage of multi-component and multi-target holistic regulation in the prevention and treatment of DKD. This article systematically reviews how TCM formulas (such as Shenqi Dihuang Decoction, Qibang Tangshen Decoction, etc.) and active ingredients (such as astragaloside IV, Portulaca polysaccharides, salidroside, etc.) delay the progression of DKD by regulating ferroptosis-related pathways (such as Fe2+, Nrf2/GPX4), inhibiting lipid peroxidation, modulating iron homeostasis, and alleviating oxidative stress and inflammatory responses. Existing research highlights the great potential of traditional Chinese medicine targeting ferroptosis in the treatment of DKD, providing an important theoretical basis and research direction for developing new kidney protection strategies.