Because of the complexity of the components in Traditional Chinese Medicine formula (TCM formula), it is still a challenge to identify its effective components, to elucidate the mechanism of the components, and to discover the relationship between components and therapy objectives. In this paper, a method called directed TCM grammar systems (dTGS) for effective component identification was proposed using entity grammar systems (EGS) as the theoretical framework. The component-disease relationship of a TCM formula (i.e., Bai-Hu decoction plus Wasting-Thirsting formula, BHDWT) and one disease (i.e., type 2 diabetes mellitus) treated with it was studied, and the effective component groups (ECGs) were identified. 19 compounds were found acting on 20 proteins in type 2 diabetes mellitus (T2D) disease network, and 15 compounds were determined as the candidate effective components. Results indicated that this method can be used to identify the effective components and provide an innovative way to elucidate the molecular mechanism of TCM formulas.