The invention relates to a water-based paint of lost foam for iron casting. The water-based paint is characterized by comprising the following raw materials: high bauxite, precious peal powder, brown aluminum oxide, sodium bentonite, polyacrylamide, a polyvinyl acetate emulsion, maltodextrin, silica sol, sodium hexametaphosphate, tributyl phosphate, sodium pentachlorophenate, OP-10 active agent and water. A production method of the water-based paint comprises the steps: pretreating the sodium bentonite, pretreating the polyacrylamide and the maltodextrin, adding the water, the sodium pentachlorophenate, the tributyl phosphate and the sodium hexametaphosphate into a high-speed dispersion kettle, stirring and then sequentially adding the sodium bentonite slurry and a polyacrylamide and maltodextrin pretreatment solution into the dispersion kettle, sequentially adding the polyvinyl acetate emulsion and the silica sol into the dispersion kettle, sequentially adding the OP-10, the high bauxite, the precious pearl powder and the brown aluminum oxide to the dispersion kettle under a stirring state, and conducting high-speed dispersion for 30 minutes after completing the feeding. The water-based paint is unique in the raw materials, environment-friendly, high in coating strength, anti-cracking, good in permeability, and free from carbon lack of castings.