The invention discloses a modified polylactic acid fiber and a preparation method thereof. The modified polylactic acid fiber is prepared through blending polylactic acid, a cellulose derivative, a cellulose diacetate grafted polylactic acid copolymer, a lubricant, inorganic nanoparticles, a nucleating agent and an antioxidant. The preparation method comprises the following steps: adding partial polylactic acid slices and all other raw materials to a high speed mixer according to a mass component ratio, carrying out high speed dispersion, and carrying out melt blending and extrusion through a double screw extruder to obtain modified polylactic acid master batch slices; and carrying out dry mixing of the modified polylactic acid master batch slices and residual polylactic acid slices in the high speed mixer, carrying out melt spinning through a melt spinning machine, and stretching to obtain the modified polylactic acid fiber. The prepared polylactic acid fiber has the advantages of low cost, complete biodegradation, environmental protection, good spinning performance, stable filament bundle quality, excellent flexibility, excellent antifriction, excellent dyeing property and excellent comfortableness, and is a very good high-performance environmentally-friendly fiber material. The preparation method has the advantages of simplicity, low equipment requirement, and environmental protection in the production process, and is in favor of the industrialized production.