The invention relates to the technical field of a pelletizing craft process of powdered iron during a pelletizing process, particularly to a pellet additive and a preparation method thereof. The pellet additive mainly consists of hydroxyethyl cellulose, hydroxypropyl cellulose, povidone (PVP), gelatin, gelatinized starch, cationic polyacrylamide, anionic polyacrylamide, high temperature glue, sodium humate, polyvinyl alcohol, sodium bentonite, sodium carbonate and other substances. The pellet additive is prepared through batching, mixing, testing and other steps. The problem that the pelletizing rate of the powered iron during the palletizing process is low is solved. The pellet additive and the preparation method thereof have the advantages that the rate of return mine is reduced, a large amount of cost is saved, the compressive strength and the drop strength of pellets can be significantly improved, pelletized granularity is uniform, pelletized surfaces are smooth, and the compressive strength of finished balls is significantly improved.