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This invention discloses a water-soluble punching and shearing oil, comprising the following components in 100 parts by weight: 20.0-35.0 parts rust inhibitor; 10.0-20.0 parts lubricant; 3.0-10.0 parts surfactant; 0.5-3.5 parts bactericide and mildew inhibitor; 0.5-2.0 parts other additives; and the balance being deionized water. This punching and shearing oil can be used in various sheet metal deep drawing and punching processes. It can be diluted for use, effectively reducing users' oil costs. Simultaneously, it avoids oil mist and VOC problems caused by using oily products in the workshop, thus purifying the workshop operating environment. Parts punched and sheared using this invention have smooth surfaces, complete cuts, good gloss, and are burr-free. Processed parts are easy to clean or require no cleaning, significantly saving on overall costs such as materials, water resources, and labor.