The invention relates to a pigment pencil for underglaze painting of ceramics and an application method of the pigment pencil. The pigment pencil for the underglaze painting of the ceramics is made up of a penholder and a refill, wherein the refill is prepared from the materials in percentage by weight: 70% to 90% of high-temperature underglaze painting pigment for ceramics, 5% to 30% of paraffin and 2% to 8% of clay. According to the pigment pencil for the underglaze painting of the ceramics, provided by the invention, the traditional underglaze painting pigment for ceramics is processed into a pencil refill structure which is convenient to operate, and a writing-brush underglaze painting mode, which is hard to master, is improved into a pencil painting mode which is common in daily lives, so that the material category and mode of expression of the underglaze painting of the ceramics are enriched. According to the pigment pencil for the underglaze painting of the ceramics, provided by the invention, the use in basic instruction of the ceramics is better facilitated, the popularization rate is high, the pigment pencil is simple and convenient in operation, is smooth and clear, is not prone to falling and is durable in stability, and the transition of a ceramics underglaze painting process to the pigment-pencil-for-the-underglaze-painting-of-the-ceramics, i.e., hard-pen convenient operating process from a writing-brush-dipping-pigment soft-pen tedious operating process is achieved.