Ethnic music, as a symbol of the cultures of various ethnic groups, the use of its elements in residential space not only enhances the artistic value of the design, but also enhances the emotional expression of the space. This study explores the innovative use of ethnic music elements in modern residential decoration. Through literature review and actual design case analysis, the questionnaire method was used to assess the application effect of ethnic music elements in modern residential design. The results showed that the residential background music system with ethnic music elements significantly improved the subjects’ sleep quality and quality of life, especially in terms of energy and mental health. Specific data analysis showed that subjects in the experimental group improved their sleep efficiency (SE) by 17.46% and extended their actual total sleep time (TST) by 75.14 minutes (P<0.05). The quality of life assessment also showed that the experimental group scored significantly higher than the control group in both the energy dimension and the mental health dimension. It was concluded that ethnic music elements not only enhanced the aesthetic value of the living space, but also played a positive role in promoting physical and mental health. In the future, the functional design of ethnic music combined with smart home systems will become a new trend to enhance the comfort and spiritual solace of modern residences.