The invention discloses a sustained-release compound fertilizer and a preparation method thereof. The sustained-release compound fertilizer is prepared from the following raw materials in parts by weight: 20 to 30 parts of urea, 30 to 40 parts of monoammonium phosphate, 5 to 10 parts of calcium superphosphate, 10 to 15 parts of potassium chloride, 1 to 2 parts of zinc sulfate, 1 to 2 parts of manganese sulfate, 2 to 3 parts of ferrous sulfate, 0.5 to 1.5 parts of borax, 3 to 5 parts of humic acid, 8 to 12 parts of modified clay and 4 to 6 parts of chitosan coating agent. The fertilizer has high sustained-release performance, double good functions of pest killing and water retention, high and long-lasting fertilizer efficiency and high nutrition utilization rate, a coating material is easy to degrade, pollution is completely avoided, the rapid growth of crops can be promoted, the stress resistance of the crops can be improved, the ecological balance of soil can be adjusted, the quality of agricultural products can be improved, and both production and income of the agricultural products are increased. Sources of the raw materials are extensive, and a production process is simple, convenient to operate, low in equipment investment, low in cost and applicable to industrial production, and has a broad market prospect.