The invention discloses a composite seedling growing substrate for paddy rice and a preparation method thereof. The method comprises the following steps: (1) mixing alcohol residue with domestic sludge, then adding a fermentation inoculum, carrying out aerobic fermentation at high temperature, then carrying out crushing and drying, adding nutrient soil and charcoal ash and carrying out uniform mixing so as to prepare organic fertilizer; and (2) separately crushing the organic fertilizer and inorganic fertilizer and carrying out mechanical uniform mixing so as to prepare the composite seedling growing substrate for paddy rice. The prepared composite seedling growing substrate for paddy rice comprises, by volume, 20 to 30% of alcohol residue, 20 to 30% of domestic sludge, 10 to 15% of charcoal ash, 25 to 30% of nutrient soil and 5 to 15% of inorganic fertilizer. With the preparation method, more abundant seedling growing substrates for paddy rice can be obtained under the condition of no increase of cost, wider seedling growing substrate resource materials are obtained, organic waste is converted and utilized, and ecological environment is protected.