The invention discloses bismuth-containing free-cutting pre-hardened plastic die steel and a preparation method thereof. The die steel comprises the following chemical components of, in percentage bymass, 0.32%-0.40% of C, 0.15%-0.30% of Si, 1.50%-1.70% of Mn, 1.70%-2.00% of Cr, 0.85%-1.15% of Ni, 0.25%-0.40% of Mo, less than or equal to 0.015% of P, less than or equal to 0.005% of S, 0.05%-0.10%of V, 0.05%-0.15% of Bi, and the balance Fe. The preparation method comprises the following steps that smelting and casting are performed into a cast ingot according to set chemical components, the cast ingot is subjected to high-temperature homogenization treatment into a forging stock, normalizing treatment is performed offline after forging to refine grains, and finally, quenched-tempered heattreatment is performed to obtain a uniform structure with the hardness of 32-48HRC. According to the bismuth-containing free-cutting pre-hardened plastic die steel, through reasonable chemical component design, the bismuth element is added to replace traditional free-cutting elements including sulfur and lead, and due to the fact that a sulfur content is controlled, reasonable forging and heat treatment processes are matched, the hot brittleness phenomenon and anisotropy caused by the sulfur element are avoided, meanwhile, the problems that the lead is harmful to human bodies and pollutes anenvironment are solved.