The invention discloses water transfer printing paper and a preparation method thereof. The water transfer printing paper comprises a hydrosol layer, a film-forming adhesive layer, carrier backing paper and an opposite colloid layer sequentially from top to bottom, wherein the opposite colloid layer is a starch layer; the film-forming adhesive layer comprises an activity colloid layer and a white colloid layer sequentially from top to bottom; the activity colloid layer is obtained by coating and drying a mixed aqueous solution of a brightening agent and the starch; the mass fractions of the brightening agent and the starch are respectively 0.5%-1% and 35%-45%; and the white colloid layer is a starch layer. The hydrosol layer is obtained by coating and drying a mixed aqueous solution of kaolin, a butylbenzene emulsion, a dispersing agent and polyvinyl alcohol; and the mass fractions of the kaolin, the butylbenzene emulsion, the dispersing agent and the polyvinyl alcohol are respectively 40%-50%, 10%-15%, 1%-3% and 3%-5%. The water transfer printing paper disclosed by the invention has the advantages of a smooth and flat surface, rational thickness of coated glue layers, higher de-molding speed, uniform water absorbability, and uniform and smooth glue surface.