The invention provides a coiled tubing tractor and a working method thereof. The coiled tubing tractor is connected between an underground power drilling tool and a coiled tubing, and is characterizedby comprising a shell, a rotor and a steering system, the rotor and the steering system are arranged in the shell, and the rotor can rotate at a high speed under the impact action of high-pressure drilling fluid to generate power; and the steering system comprises a main steering shaft 14, an auxiliary steering shaft 16 and a crawling wheel 13 and is used for changing the output direction of power so as to drive the coiled tubing to advance in a horizontal well. Cable power supply is not needed, the possibility of underground accidents is reduced, and hydraulic driving is adopted, so that energy can be effectively saved; when the coiled tubing works, the tubing does not rotate, so that the wheel type tractor with larger traction force is adopted in the coiled tubing work; and when the coiled tubing is used for horizontal well drilling operation, the coiled tubing tractor can also play a role of a centralizer, and the coiled tubing can be effectively centered, so that abrasion is reduced.