The invention relates to a rare earth nickel magnesium intermediate alloy for a hydrogen storage alloy, which comprises the following compositions in percentage by mass: 40-65 percent of Mg, 30-55 percent of Ni, 1-5 percent of RE, 0-0.5 percent of Fe, 0-1.5 percent of Si, 0-2.5 percent of Al, 0-0.5 percent of Zn, 0-0.5 percent of Cu, 0-0.1 percent of Cr, 0-0.5 percent of Mn, 0-0.5 percent of Ti, and 0-0.5 percent of Ca, wherein the RE comprises 0-100 percent of Y, 0-50 percent of La, and 0-50 percent of Ce. A preparation method comprises the following steps of: material processing, compounding, loading, vacuumizing, gas shielding, power transmitting, melting, stirring, secondary feeding, halting, stirring and pouring. The rare earth nickel magnesium intermediate alloy for the hydrogen storage alloy has stable components, and is suitable for being added into hydrogen storage materials.