Essential oil is one of the most important bioactive substances of Artemisia argyi Levl. et Van. var. argyi cv. Qiai, a traditional Chinese herb used in folks for centuries. An essential oil was prepared by steam distillation method. Chemical components of the essential oil were explored by gas chromatography-mass spectrometry. Antimicrobial activities of the essential oil were determined by agar disc diffusion assay and double-broth dilution method. Also, antimicrobial mechanisms were investigated based on cytomembrane permeability, protein and K+ leakage and electron microscopy. The results showed that the essential oil yield was (0.7 ± 0.02)% (w/w). A total of 32 components were identified, and thujone was found to be the major compound (14.94%), followed by globulol (11.6%), 1,8-cineole (11.31%), 1-caryophyllene (8.11%), camphor (6.87%), α-terpineol (4.69%), caryophyllene oxide (4.05%), borneol (3.95%), eugenol (3.01%), and germacrene D (2.81%). The oil showed antimicrobial activities against both Gram-positive and Gram-negative bacteria. The minimum inhibition concentrations of the essential oil against Staphylococcus aureus, Bacillus cereus, Bacillus subtilis, Listeria monocytogenes, Escherichia coli, Pseudomonas aeruginosa, and Salmonella Typhimurium were 16.0, 16.0, 32.0, 32.0, 32.0, 64.0, and 32.0 μg/mL, respectively. The minimum bactericidal concentrations of the essential oil against bacteria mentioned above were 32.0, 16.0, 64.0, 64.0, 64.0, 128.0, and 64.0 μg/mL, respectively. Supposedly, the possible antimicrobial mechanism of the essential oil involved simultaneous cytomembrane disruption, leading to the leakage of intracellular substances, such as protein and K+. The results indicated that the cytomembrane might be the target of essential oil.