Objective To analyze the effect of Xiaoyao powder in the treatment of melasma of liver depression and kidney deficiency type during menopause. Methods A total of 80 patients with melasma of liver depression and kidney deficiency type during menopause admitted to Binhai County Hospital of Traditional Chinese Medicine from January 2023 to January 2025 were selected as the research subjects, and they were divided into the control group (n =40) and the study group (n =40) by the random number table method. The control group received conventional treatment, and the study group received Xiaoyao powder on the basis of the control group. The TCM syndrome scores, skin lesion improvement and quality of life were compared between the two groups. Results After treatment, the TCM syndrome scores of the two groups were lower than those before treatment, and those of the study group were lower than those of the control group (P<0.05). After treatment, the MASI score of the two groups was lower than that before treatment, and that of the study group was lower than that of the control group (P<0.05). After treatment, the DLQI score of the two groups was lower than that before treatment, and that of the study group was lower than that of the control group (P <0.05). Conclusion The application of Xiaoyao powder in the treatment of melasma of liver depression and kidney deficiency type during menopause can effectively improve skin lesions, reduce TCM syndromes, and help to improve patients' quality of life.