Artemisia argyi (A. argyi) is a Chinese herbal medicine with reported anti-inflammatory effects. In this study, the A. argyi was extracted with water and ethanol, and the concentrations of 35 flavonoids in A. argyi water extract (WE) and ethanol extract (EE) were measured via targeted metabolomics. The antioxidant and anti-inflammatory activities of both WE and EE were firstly explored in vitro via chemical assays and cellular experiment, respectively. Both WE and EE showed significant 1,1-diphenyl-2-picrylhydrazyl (DPPH), 2,2’-azino-bis(3-ethylbenzothiazoline-6-sulfonic acid) (ABTS), ·OH, and O2· radical scavenging ability in a dose-dependent manner, and reduced the levels of interleukin-1β (IL-1β), tumor necrosis factor-α (TNF-α) and interleukin-22 (IL-22) in lipopolysaccharide (LPS) induced RAW264.7 cell model. In addition, the in vivo anti-colitis activity of both extracts was investigated in dextran sulfate sodium (DSS)-induced colitis mice, and the underlying mechanisms were elucidated by 16S rDNA sequencing and targeted metabolomics. We found that both WE and EE relieved colitis in mice, characterized by decreased disease activity index, increased colon length, improved pathological changes in colon tissue, while EE showed better anti-colitis activity. In addition, both 16S rDNA sequencing and targeted bile acids metabolomics indicated EE modulated gut microbiota and specifically increased the abundance of lithocholic acid (LCA), which might contribute to intestinal barrier function improvement via up-regulating the expression of colonic farnesoid X receptor (FXR). In summary, this study identified the anti-colitis mechanism of A. argyi EE by modulating gut microbiota, facilitating the production of LCA, activating FXR and improving intestinal barrier function.