The invention discloses a nanocrystalline soft magnetic composite material and a preparation method thereof. The nanocrystalline soft magnetic composite material is characterized in that iron-based nanocrystalline alloy is used as the alloy component; the alloy structure as shown in a form of atomic ratio meets the formula that Fe (100-a-b-c-d) (lower coordinate)Cu(a) (lower coordinate)T(b) (lower coordinate)M(c) (lower coordinate)D(d) (lower coordinate), wherein a ranges from 1 to 3, b ranges from 15 to 25, c ranges from 1 to 5, d is more than 0 and not greater than 3, T is one or more of Si, B or C, M is one or more of Nb or P, and D is one or more of rare earth elements. The preparation method comprises the steps of smelting alloy, atomizing to prepare powder, passivating, pressing and molding, thermally processing and curing. According to the preparation method of the nanocrystalline soft magnetic composite material, the atomized spherical powder is passivated through phosphoric acid to form an uniform insulating wrapping layer, and the non-crystalline is converted into nanocrystalline during annealing; the obtained nanocrystalline soft magnetic composite material is high in magnetic conductivity, small in loss, and outstanding in DC bias characteristics.