The invention discloses a heavy oil upgrading method capable of preparing methane. The heavy oil upgrading method comprises following steps: light oil is obtained after contact cracking of low-quality heavy oil, and at the same time, an obtained coked catalyst is delivered into a gasification unit; in the gasification unit, coke on the coked catalyst and a gasification agent are subjected to gasification and methanation reaction so as to obtain a gasification gas containing CH4, CO, H2 and CO2, wherein sulfur in the gasification gas mainly comes from H2S; the gasification gas is delivered into desulphurizing equipment for desulphuration, and then the gasification gas is further separated, obtained CH4 is removed, and obtained CO and H2 are delivered back to the gasification unit; an obtained a semi-regenerative contact agent is delivered into a regeneration unit, and in the presence of oxygen, complete combustion of carbon residue on the semi-regenerative contact agent is realized so as to obtain a complete-regenerative contact agent and smoke, wherein sulfur in the smoke mainly comes from SOx; the smoke is delivered through a alkali washing device, or is processed using a sulfur transferring agent so as to achieve emission standards, and then is discharged, and the complete-regenerative contact agent is delivered back to a contact cracking reactor. The heavy oil upgrading method is capable of realizing utilization of petroleum resources with high efficient and little pollution.