The invention discloses a micro-emulsified cutting fluid for aluminum magnesium alloy and a preparation method thereof. The cutting fluid comprises the following ingredients as raw materials in parts by weight: 24 parts of naphthenic oil, 14 parts of castor oil, 16 parts of eucalyptus oil, 13 parts of sulfonated caster oil, 7 parts of fatty glyceride, 14 parts of sodium oleate, 10 parts of hydroxyl alkyl phenol polyoxyethylene ether, 7 parts of barium petroleum sulfonate, 7 parts of sorbitan monooleate, 7 parts of tween-80, 7 parts of potassium naphthenate, 4 parts of sodium benzoate, 7 parts of simethicone, 16 parts of vulcanized cottonseed oil, 10 parts of octylphenol polyoxyethylene ether, 5 parts of triethanolamine oleate, 8 parts of sorbitan fatty acid sorbitan, 6 parts of biocide BIT-10 (1,2-benzeisothiazoline-3-one), 13 parts of an additive and 26 parts of deionized water. The micro-emulsified cutting fluid has advantageous performances in the aspects of aluminum corrosion inhibition, anticorrosion, lubricity, rust resistance, deforming, the service cycle and the like.