The invention discloses a wire peeling device based on power system cable construction, and a construction method thereof. The device comprises a handle, a top supporting plate, inserting plates, and a side pressing plate, the rear end of the top supporting plate is fixedly connected with the front end of the handle through a connecting vertical plate, and a second U-shaped through hole is dug in the middle of the top supporting plate. Second baffles are arranged on the two sides of the second U-shaped through hole respectively, a circular blade is connected between the two second baffles in a sliding mode through a connecting rod, grooves are dug in the two sides of the top supporting plate respectively, and the inserting plates are inserted into the grooves. A bent plate is arranged at the end portion of each inserting plate, and a cutting assembly is arranged on the bent plate. The device is suitable for cables with different diameters, the distance between the blades can be adjusted according to the thickness of the cable sheath, the cable and the sheath can be quickly separated, the situation that the blades penetrate into the cable sheath too deep and damage a cable core can be avoided, and the device is practical, convenient to use, easy to operate, time-saving, labor-saving, convenient to carry and easy to popularize.