The invention provides environment-friendly flame retardant insulating paint and a preparation method thereof. The paint is prepared from the following components: organosilicon modified epoxy resin, acrylic modified polyurethane resin, silicon nitride, calcium carbonate, nano silicon carbide, nano magnesium oxide, magnesium oxide, carboxymethyl cellulose, a titanate coupling agent, flame retardant filling, acetone, talcum powder, bentonite, a cosolvent, a dispersant, a leveling agent and de-ionized water. The paint adopts the organosilicon modified epoxy resin matched with the acrylic modified polyurethane resin, so the paint has good gloss, good antistatic effect and better mechanical properties, ageing resistance and wear resistance; addition of the nano silicon carbide, flame retardant filling and nano magnesium oxide can effectively improve the oxidation resistance and flame retardant ability of the paint; moreover, the paint has the advantages of low price, environment protection, strong adhesion, good ductility, high temperature resistance and long service life; and roller coating is substituted for spray coating during application, so that the production environment is effectively improved and physical health of workers is benefited.