The invention relates to a multifunctional biological seed coating agent and a preparation method thereof. The multifunctional biological seed coating agent comprises auxiliary agents and beneficial microorganism, volume ratio thereof is 1:1-5, and effective bacterium content is not less than or equal to 10<8>cfu/ml. The auxiliary agent comprises one or various auxiliary agents in film former, dispersant, adhesion agent, protectant, nutritient, anti-freeze agent, preservative and colourant. The beneficial microorganism is selected from one or various rhizobium, azotobacter, pseudomonad, bacillus, K pneumoniae, Enterobacter cloacae and Raoulterlla planticola. The preparation method comprises the following steps: dissolving the polyvinyl alcohol and natural substance with water in a reaction kettle, mixing with the water dispersion liquid of the adhesion agent to prepare a film forming agent, and finally mixing and stirring mechanically with the beneficial microorganism fermentation liquor to obtain the finished product. The invention has the advantages of no residue, high efficiency, low toxicity, strong specificity, good film forming effect and convenient application, therefore, the multifunctional biological seed coating agent plays an significant role of preventing and controlling cotton seedling diseases as well as enhancing the cotton seedling growth under salt stress.