The invention discloses a low-smoke halogen-free flame-retarding thermoplastic elastomer alloy used for soft wires and a preparation method of the alloy, which is characterized in that: the material comprises thermoplastic polyurethane elastomer, thermoplastic styrene elastomer, compatilizer, phosphorus-nitrogen compound flame retardant, flame-retarding potentiating agent, lubricant, antioxidant and colorant; the weight ratio of the thermoplastic polyurethane elastomer, the thermoplastic styrene elastomer, the compatilizer, the phosphor-nitrogen compound flame retardant, the flame-retarding potentiating agent, the lubricant, the antioxidant and the colorant is 40 to 55 : 5 to 25 : 5 to 10 : 20 to 25 : 3 to 10 : 1.5 : 0.25 : 0.25; the preparation method is that the all components are evenly mixed in a high-speed mixer, and then extruded, drew and granulated at 170 to 210 degree centigrade, and then a low-smoke halogen-free flame-retarding thermoplastic elastomer alloy used for soft wires is obtained. The low-smoke halogen-free flame-retarding thermoplastic elastomer alloy used for soft wires has the advantages of achieving distinct flame-retarding effect at a small quantity of flame retardant dosage, satisfying the flame-retarding requirement of low-voltage wires, adjusting the Shore durometer number of the material between 80 to 95, good pliability, high physical mechanical property and according with the halogen-free and environment-friendly requirement.