Plant essential oils, as biological pesticides, have been reviewed from several perspectives and play a key role in chemical ecology. However, plant essential oils show rapid degradation and vulnerability during actual usage. In this study, we conducted a detailed analysis of the compounds present in the essential oils of A. stechmanniana using gas chromatography–mass spectrometry (GC-MS). The results showed seventeen terpenoid compounds in the A. stechmanniana oil, with four major terpenoid compounds, i.e., eucalyptol (15.84%), (+)-2-Bornanone (16.92%), 1-(1,2,3-Trimethyl-cyclopent-2-enyl)-ethanone (25.63%), and (-)-Spathulenol (16.38%), in addition to an amount of the other terpenoid compounds (25.26%). Indoor toxicity assays were used to evaluate the insecticidal activity of Artemisia stechmanniana essential oil against Aphis gossypii, Frankliniella occidentalis, and Bactericera gobica in Lycium barbarum. The LC₅₀/LD₅₀ values of A. stechmanniana essential oils against A. gossypii, F. occidentalis, and B. gobica were 5.39 mg/mL, 0.34 mg/L, and 1.40 μg/insect, respectively, all of which were highly efficient compared with azadirachtin essential oil. Interestingly, A. stechmanniana essential oil embedded in β-cyclodextrin (microencapsule) remained for only 21 days, whereas pure essential oils remained for only 5 days. A field efficacy assay with the A. stechmanniana microencapsule (AM) and doses at three concentrations was conducted in Lycium barbarum, revealing that the insecticidal activities of AM showed high efficiency, maintained a significant control efficacy at all concentrations tested, and remained for 21 days. Our study identified terpenoid compounds from untapped Artemisia plants and designed a novel method against pests using a new biopesticide on L. barbarum.