The invention discloses an anti-corrosion, anti-discoloration and environment-friendly water-based magnesium alloy cutting fluid, which comprises the following components by weight percentage: 5-10 parts of base oil, 5-15 parts of oily agent, 10-25 parts of organic 5-15 parts of rust agent, 15-25 parts of functional polyether surfactant, 0.2-3 parts of extreme pressure additive, 3-8 parts of solubilizer, 0.1-2 parts of metal corrosion inhibitor, 0.1-2 parts of magnesium alloy anti-discoloration agent 0.1-2 parts of fungicide, 0.1-1 part of defoamer, 0.1-10 parts of pH regulator, and 15-30 parts of water. The invention has excellent anti-corrosion, lubricating and anti-hard water capabilities, good cleaning and cooling effects, and effectively improves several major problems in the process of magnesium alloy processing, such as corrosion, oxidative combustion, discoloration of magnesium alloys, and demulsification and delamination of cutting fluids. The technical problem is that the pH value is between 9-11, which better meets the requirements of the magnesium alloy cutting process.