To assess the efficacy and safety of Moluodan (ae (c) c1/2ua(1)) in treating dysplasia in chronic atrophic gastritis (CAG) patients. This was a multi-centered, double-blind, randomized controlled trial. The total of 196 subjects were assigned to receive either Moluodan or folic acid in a 2:1 ratio by blocked randomization. Mucosa marking targeting biopsy (MTB) was used to insure the accuracy and consistency between baseline and after 6-month treatment. Primary outcomes were histological score, response rate of pathological lesions and dysplasia disappearance rate. Secondary endpoints included gastroscopic findings, clinical symptom and patient reported outcome (PRO) instrument. Dysplasia score decreased in Moluodan group (P =0.002), significance was found between groups (P =0.045). Dysplasia disappearance rates were 24.6% and 15.2% in Moluodan and folic acid groups respectively, no significant differences were found (P =0.127). The response rate of atrophy and intestinal metaplasia were 34.6% and 23.0% in Moluodan group, 24.3% and 13.6% in folic acid group. Moluodan could improve erythema (P =0.044), and bile reflux (P =0.059), no significance between groups. Moluodan was better than folic acid in improving epigastric pain, epigastric suffocation, belching and decreased appetite (P < 0.05), with symptom disappearance rates of 37% to 83%. Moluodan improved dysplasia score in histopathology, and erythema and bile reflux score in endoscopy, and superior to folic acid in improving epigastric pain, epigastric suffocation, belching and decreased appetite. [ChiCTR-TRC-00000169].