The invention relates to the technical field of skin care products, in particular to fine line fading and moisturizing type water emulsion and a preparation method thereof. Comprising the following raw materials: allantoin, butanediol, glycerol, cetyl-PG hydroxyethyl palmitamide, retinol, PEG-150 glyceryl distearate, sodium hyaluronate, squalane, sweet almond oil, alpha-glucoside hesperidin, L-arginine, PEG50 hydrogenated castor oil, essence and deionized water. The moisturizing and hydrating water emulsion is prepared from the following raw material components in percentage by mass: 2 to 5 percent of allantoin, 2 to 4 percent of butanediol, 3 to 5 percent of glycerol, 1 to 3 percent of cetyl-PG hydroxyethyl palmitamide, 0.8 to 1.2 percent of retinol, 0.1 to 0.3 percent of PEG-150 glyceryl distearate, 3 to 5 percent of sodium hyaluronate, 2 to 4 percent of squalane, 4 to 6 percent of sweet almond oil, 0.2 to 0.4 percent of alpha-glucoside hesperidin, 2 to 5 percent of L-arginine, 0.3 to 0.9 percent of PEG50 hydrogenated castor oil, 0.1 to 0.3 percent of essence and a proper amount of deionized water. Moreover, the skin irritation is low, fine wrinkles can be effectively faded, and the overall using effect is better.