The invention provides a shape memory alloy and a preparation method thereof, belonging to the technical field of materials. The shape memory alloy comprises the following components in percent by weight: 14-15% of Mn, 6-7% of Si, 9-10% of Cr, 5-6% of Ni, 0.05-0.1% of C, and the balance of Fe. The preparation method of the shape memory alloy comprises the following steps: firstly, according to the weight percentages of all components of the shape memory alloy, respectively taking the following raw materials, such as ultra low carbon steel, Mn, Si, Cr and Ni, or respectively taking low carbon steel, Fe, Mn, Si, Cr and Ni; secondly, melting all raw materials except Mn by vacuum induction; and thirdly, adding Mn in the mixture and conducting melting in the inert gas and obtaining the shape memory alloy by natural cooling. The strength and recoverable strain of the shape memory alloy is obviously higher than those of the normal Fe-Mn-Si alloy, the corrosion resistance of the shape memory alloy is good, the recoverable strain of the shape memory alloy is 3% under a casting condition and is further increased after solution-quenching treatment; furthermore, the preparation process of the shape memory alloy is simple.