Objective To analyze the effect of halometasone combined with fire needle in the clinical treatment of circumscribed neurodermatitis. Methods A total of 64 patients with circumscribed neurodermatitis admitted to our hospital from April 2023 to June 2024 were selected as the research objects. They were divided into reference group and experimental group by random number table method, with 32 patients in each group. The reference group was treated with halometasone cream, and the experimental group was treated with fire needle therapy on the basis of the reference group. The clinical efficacy, TCM symptom score, inflammatory factor level and quality of life were compared between the two groups. Results The total effective rate of the experimental group was 96.88%, which was higher than 78.13% of the reference group (P <0.05). The pruritus degree, skin lesion morphology, hypertrophy degree and pigmentation score of the experimental group were lower than those of the reference group (P <0.05). The levels of TNF-α, IL-6 and IL-8 in the experimental group were lower than those in the reference group (P <0.05). The scores of each dimension of quality of life in the two groups after treatment were higher than those before treatment, and those in the experimental group were higher than those in the reference group (P <0.05). Conclusion The combination of fire needle and halometasone can improve the clinical efficacy of patients with circumscribed neurodermatitis, accelerate the improvement of symptoms, inhibit the level of inflammatory factors, and improve the quality of life of patients.