The invention relates to a multifunctional ecological plastic film compound fertilizer and a preparation method and an application method thereof, relating to the technical fields of farm and sideline products deep processing, novel environmental fertilizer researching, comprehensive utilization of resources, ecological environment engineering, chemical engineering and technology, water and soil conservation, desertification prevention and control and the like. The invention is characterized by putting organic wheat straws which has the length of 2 to 4cm and the weight percentage of 70 to 80 percent, and inorganic nitrogen phosphorus fertilizer which has the weight percentage of 20 to 30 percent into a 20-40m<3> cooking and boiling retort, inputting water vapor, cooking and boiling for 3 to 5 hours under high temperature and high pressure; filter pressing and extracting fertilizer solution; evaporating and concentrating; modifying and compounding; and sponging drying and preparing a mahogany power product which is the multifunctional ecological plastic film compound fertilizer. The product has the advantages of replenishing soil nutrient, fostering soil productivity, conserving water and soil, saving water and holing water, improving sandlot, fixing the high content of shifting sand, and being capable of being used for national desertification land management, fostering the soil in industrial and mining reclaiming area, ecological rebuilding, water and soil conservation and improvement in river bench land, pejorative grassland vegetation restoration and fertilizer application and water saving in ordinary dry farms.