Abstract Background In Traditional Chinese Medicine (TCM) theories, the typical clinical manifestations of gout are attributed to the “dampness-heat pouring downward.” Therefore, TCM practitioners always consider prescribing the formulae which are believed to clear heat and drain dampness for the management of gout. This clinical trial aims: (1) to determine the hypouricemic effect of “Yellow-dragon Wonderful-seed Formula” (YWF) decoction in gout patients with dampness-heat pouring downward pattern and (2) to determine if gypsum could provide additional significant benefits to YWF. Methods A total of 72 hyperuricemic individuals with gout and dampness-heat pouring downward pattern were included with 62 of them completing the trial. Participants were randomly assigned to the YWF group, the YWF + gypsum group, or the allopurinol group. YWF and YWF + gypsum decoctions were orally administered for four weeks. Allopurinol was also orally administered for four weeks as the active control. Serum uric acid (sUA) level was the primary outcome measure. Urine urate level, scores on the SF-36 scale, erythrocyte sedimentation rate (ESR), X ray film, and C reactive protein (CRP) level were the secondary outcome measures. Results Compared with the values at week 0, YWF and YWF + gypsum did not significantly decrease the sUA level at each weekend reading. YWF, YWF + gypsum, and allopurinol decreased the urine urate levels and there were significant differences between the YWF group and the YWF + gypsum group. All the changes in the eight structures of SF-36 during the intervention period were not significantly different among the three groups and there was no significant difference in the CRP level among the three groups at each weekend reading. Conclusions YWM, which modified on the basis of Two Wonderful Herbs Powder (2WHP), does not show significant hypouricemic effect. There is a possibility that Gypsum Fibrosum may provide additional effects to YWF in decreasing the urine urate levels but cannot add benefits to YWF in other outcome measures. Trial registration Chinese Clinical Trial Registry, ChiCTR-TRC-12001933 . Registered on 10 February 2012.