Processing (Paozhi) represents a unique Chinese pharmaceutic technique to facilitate the use of Chinese herbal medicines (CHMs) for a specific clinical need in the guidance of Traditional Chinese Medicine (TCM) theory. Traditionally, most CHMs require a proper processing to meet the needs of specific clinical syndromes before being prescribed by TCM practitioners. During processing, significant changes in chemical profiles occur, which inevitably influence the associated pharmacological properties of a CHM. However, although processing is formed in a long-term practice, the underlying mechanisms remain unclear for most CHMs. The deepening understanding of the mechanism of processing would provide scientific basis for standardization of processing. This review introduced the role of processing in TCM and several typical methods of processing. We also summarized the up-to-date efforts on the mechanistic study of CHM processing. The processing mechanisms mainly include the following aspects: (i) directly reducing contents of toxic constituents; (ii) structural transformation of constituents; (iii) improving solubility of constituents; (iv) physically changing the existing form of constituents; (v) and influence by excipients. These progress may give new insights into future researches.