Chinese medicinal herbal residues (CMHRs) are waste generated after extracting Chinese medicinal materials, and they can be used as a renewable bioresource. This study aimed to evaluate the potential of aerobic composting (AC), anaerobic digestion (AD), and aerobic-anaerobic coupling composting (AACC) for the treatment of CMHRs. CMHRs were mixed with sheep manure and biochar, and composted separately under AC, AD, and AACC conditions for 42 days. Physicochemical indices, enzyme activities, and bacterial communities were monitored during composting. Results showed that AACC- and AC-treated CMHRs were well-rotted, with the latter exhibiting the lowest C/N ratio and maximal germination index (GI) values. Higher phosphatase and peroxidase activities were detected during the AACC and AC treatments. Better humification was observed under AACC based on the higher catalase activities and lower E4/E6. AC treatment was effective in reducing compost toxicity. This study provides new insights into biomass resource utilisation.