The invention provides composite fuel oil and a preparation method thereof. The composite fuel oil comprises the following components of heavy oil, solvent oil and an additive, wherein the heavy oil is a substance diluted by a diluent, naturally settled and filtered; and the additive comprises a combustion-supporting agent, an atomizing agent and an anticorrosive agent. The preparation method comprises the following steps of: adding the diluent into the heavy oil; naturally settling and filtering the heavy oil added with the diluent, and removing impurities from the heavy oil; adding the solvent oil and the additive into the heavy oil after the impurities are removed, and stirring to obtain the composite fuel oil. The composite fuel oil provided by the invention has the characteristics of high efficiency, energy conservation, environmental friendliness, safety, no toxicity, no smoke or corrosion, no remained liquid, cleanness, sanitation, easy transportation, easy storage and low price; the oil saving amount can reach more than 15% averately; the composite fuel oil is the preferred fuel for replacing liquefied gas and diesel; when the composite fuel oil is applied in burning of a boiler, the content of components such as CO and SO2 of the flue gas is obviously reduced, and the heat efficiency of the boiler is increased; and the scaling condition in the boiler is obviously improved.