Chinese medicine (CM) was extensively used to treat COVID-19 in China. We aimed to evaluate the real-world effectiveness of add-on semi-individualized CM during the outbreak. A retrospective cohort of 1788 adult confirmed COVID-19 patients were recruited from 2235 consecutive linked records retrieved from five hospitals in Wuhan during 15 January to 13 March 2020. The mortality of add-on semi-individualized CM users and non-users was compared by inverse probability weighted hazard ratio (HR) and by propensity score matching. Change of biomarkers was compared between groups, and the frequency of CMs used was analyzed. Subgroup analysis was performed to stratify disease severity and dose of CM exposure. The crude mortality was 3.8% in the semi-individualized CM user group and 17.0% among the non-users. Add-on CM was associated with a mortality reduction of 58% (HR = 0.42, 95% CI: 0.23 to 0.77, p = 0.005) among all COVID-19 cases and 66% (HR = 0.34, 95% CI: 0.15 to 0.76, p = 0.009) among severe/critical COVID-19 cases demonstrating dose-dependent response, after inversely weighted with propensity score. The result was robust in various stratified, weighted, matched, adjusted and sensitivity analyses. Severe/critical patients that received add-on CM had a trend of stabilized D-dimer level after 3–7 days of admission when compared to baseline. Immunomodulating and anti-asthmatic CMs were most used. Add-on semi-individualized CM was associated with significantly reduced mortality, especially among severe/critical cases. Chinese medicine could be considered as an add-on regimen for trial use.