The invention provides a fabricated type shear wall vertical connection energy dissipation structure and a construction method thereof, and belongs to the technical field of building engineering. Thefabricated type shear wall vertical connection energy dissipation structure comprises a first shear wall prefabricated part, a second shear wall prefabricated part and lateral groove shaped steel parts. The first shear wall prefabricated part comprises a first horizontal steel plate, a plurality of first anchoring reinforcing steel bars, a first shear wall and a plurality of plug steel plate parts, and bolt holes are formed in the plug steel plate parts. The second shear wall prefabricated part comprises a second horizontal steel plate, a plurality of inserted groove steel plate parts, a plurality of second anchoring reinforcing steel bars and a second shear wall, bolt holes are formed in the inserted groove steel plate parts, and bolt holes are formed in the lateral groove shaped steel parts. According to the fabricated type shear wall vertical connection energy dissipation structure and the construction method thereof, the prefabricating ratio is low, industrial production is facilitated, the site construction difficulty can be reduced, the construction efficiency can be improved, the construction quality can be guaranteed, and the mounting precision and effectiveness of connection can be guaranteed and the action of energy dissipation and seismic mitigation is achieved.