Traditional Chinese medicine with rich resources in China and definite therapeutic effects on complex diseases demonstrates great development potential. However, the complex composition, the unclear pharmacodynamic substances and mechanisms of action, and the lack of reasonable methods for evaluating clinical safety and efficacy have limited the research and development of innovative drugs based on traditional Chinese medicine. The progress in cutting-edge disciplines such as artificial intelligence and biomimetics, especially the emergence of cell painting and organ-on-a-chip, helps to identify and characterize the active ingredients in traditional Chinese medicine based on the changes in model characteristics, thus providing more accurate guidance for the development and application of traditional Chinese medicine. The application of phenotypic drug discovery in the research and development of innovative drugs based on traditional Chinese medicine is gaining increasing attention. In recent years, the technology for phenotypic drug discovery keeps advancing, which improves the early discovery rate of new drugs and the success rate of drug research and development. Accordingly, phenotypic drug discovery gradually becomes a key tool for the research on new drugs. This paper discusses the enormous potential of traditional Chinese medicine in the discovery and development of innovative drugs and illustrates how the application of phenotypic drug discovery, supported by cutting-edge technologies such as cell painting, deep learning, and organ-on-a-chip, propels traditional Chinese medicine into a new stage of development.