The invention relates to yttria-stabilized zirconia powder and a preparation method thereof. The yttria-stabilized zirconia powder has the composition characteristics that yttria is taken as a stabilizer of a zirconia material; the powder comprises a doping system formed by one or more following third components: alumina, ceria, lanthana, copper oxide, magnesium oxide and calcium oxide, wherein the weight of the yttria is 2-8mol%, and the total doping weight of the alumina, the ceria, the lanthana, the copper oxide, the magnesium oxide and the calcium oxide is 0-5wt%. According to the yttria-stabilized zirconia powder and the preparation method, the deficiencies of an existing liquid phase preparation process of nanometer zirconia powder are overcome, and the prepared nanometer ZrO2 composite powder has the performance of uniformity in dispersion of components, uniform grain size, super-fineness, high sintering activity, good liquidity and the like. Furthermore, the preparation method is simple in process and low in cost and is easy to industrialize.