The invention discloses an iron-based memory alloy laser cladding composite coating powder. The powder is prepared by the following raw materials of, by weight, 44-54 parts of pure iron powder, 23-30parts of manganese powder, 7-13 parts of silicon powder, 3-15 parts of chromium powder, 1-13 parts of nickel powder, 0.5-1.5 parts of niobium powder, 4-16 parts of tungsten carbide powder and 0.1-5 parts of yttrium oxide powder. According to the powder and a using method thereof, in the process of preparing the cladding coating powder by using the method, hard particles generates solid solution strengthening, the undecomposed hard particles can generate second phase strengthening, and meanwhile, the hardness and the wear resistance of the coating can be improved; and the grain boundary is purified through rare earth, the structure content of microporous structure is reduced, the coating cracking tendency is reduced, the surface potential of the coating is promoted to be consistent, and therefore the corrosion resistance of the coating can be improved.