The invention belongs to the field of precision alloy, and particularly relates to a low-expansion magnetic shielding alloy for an optical fiber loop skeleton, and a preparation method thereof. The alloy comprises the following chemical components in percentage by weight: 32.0-35.2% of Ni, 3.0-3.5% of Co, 0.10-0.25% of Mn, less than or equal to 0.15% of Si, less than or equal to 0.02% of Cu, less than or equal to 0.01% of C, less than or equal to 0.01% of P, less than or equal to 0.01% of S, and the balance of Fe. The preparation method of the low-expansion magnetic shielding alloy comprises the following steps sequentially: preparation of high-purity raw materials, proportioning of ingredients, smelting of a vacuum induction furnace and vacuum arc remelting, forging and processing, sampling, thermal treatment, and performance test. The thermal treatment system comprises the steps of under protection of high-purity hydrogen gas, carrying out furnace heating to 970+ / -10DEG C, preserving heat for 2.5-3h, cooling to 550+ / -10DEG C at the speed of 200-250DEG C / h, rapidly cooling to 300DEG C below for discharging. Compared with the existing low-expansion alloy 4J32 and on the premise that low-expansion characteristic is kept, the low-expansion magnetic shielding alloy has high initial magnetic conductivity, integrates the two advantages of low expansion property and high magnetic shielding property, namely within the temperature range of -45DEG C to 75DEG C, the expansion coefficient of the alloy is 1.0*10<-6> / DEG C below; the initial magnetic conductivity is higher than 1.5mH / m.