The present invention pertains to a herbal formulation with highly potent wound healing properties, in humans and animals. The composition consists of aqueous extracts of Azadirachta indica, in a mixture of natural oils along with herbs viz. Berberis aristata, Curcuma longa, Glycyrrhiza glabra, Jasminum officinale, Picrorhiza kurrooa, Pongamia pinnata, Rubia folia, Saussurea lappa, Terminalia chebula, Trichosanthes dioica, Capsicum and Stellata wild in well-defined ratios. The invention also includes a process for preparing the formulation by extracting the water-soluble components from bark of Azadirachta indica.