The invention discloses a high-sharpness low-cost water drill tool bit and a preparation method thereof. The water drill tool bit is formed by mixing and sintering metal powder and diamond, the metal powder comprises the following components, in parts by weight, of 37 parts to 47 parts of iron, 20 parts to 30 parts of copper, 2 parts to 5 parts of tin, 27 parts to 35 parts of iron-based alloy and 0.3 part to 0.6 part of zinc stearate, and a volume of the diamond accounts for 20% to 30% of a volume of the metal powder. According to the water drill tool bit, different amounts of Fe, Cu, Sn and iron-based pre-alloyed powder are added to maintain a hardness HRB, bending strength and an abrasive ratio of a matrix, so that the mechanical property and wear resistance of the water drill tool bit are met, the iron-based alloy is added in a formula of the tool bit, a defect of insufficient alloying in the matrix can be reduced, an organizational structure of the matrix is improved, and the mechanical property of the matrix is further improved. The prepared water drill tool bit is sharp in cutting and moderate in service life greatly reduces the cost, is suitable for rapid cutting of reinforced concrete, and has the good market application prospect.