The invention discloses organic fertilizer based on soil activity improvement. The organic fertilizer is prepared from the following raw materials: dry chicken manure, grass, pine nut shells, peanut shells, weathered coal, peat, urea, monoammonium phosphate, potassium chloride, Bacillus mucilaginosus agent, Trichoderma harzianum agent, polyvinyl alcohol, a water retaining agent, an EM bacterial agent and an appropriate amount of water, wherein the water retaining agent is prepared from the following raw materials in parts by weight: 70 parts of acrylic acid, 0.5-1 part of an azo-compound, 50-110 parts of sodium hydroxide, 3-5 parts of sodium persulfate, 200-250 parts of acetonitrile and a proper amount of water. The invention further provides a preparation method of the organic fertilizer.Organic fertilizer, secondary and trace elements and microorganisms are combined organically, the formula is reasonable, the organic fertilizer is more comprehensive and balanced in nutrition and good in use effect, and accordingly, the survival rate of crops is increased, and the photosynthesis efficiency is improved; meanwhile, by adding the water retaining agent, pores in the soil are enlargedalong with regular changes of water absorption expansion and water loss shrinkage, and the purposes of water retention, fertilizer retention, heat preservation and improvement of soil activity are achieved.