The invention provides processed cheese and a preparation method thereof. The processed cheese comprises natural cheese, milk powder, emulsifying salt, colloid, lactose, lactose hydrolase and water. The preparation method of the processed cheese comprises the following steps: adding water into natural cheese, butter, milk powder and milk protein raw materials, chopping and mixing to obtain a chopped mixture, adding lactose, white granulated sugar, emulsifying salt and colloid into the chopped mixture, heating and mixing, adding lactose hydrolase, and stirring and mixing, raising the temperature to carry out Maillard reaction, dynamically sterilizing the Maillard reaction product, and filling the sterilized product to obtain the processed cheese. According to the invention, the Maillard reaction is introduced into the preparation of the processed cheese, the charcoal-roasted flavor processed cheese and the preparation method thereof are provided, and the processed cheese prepared according to the invention is rich in nutrition, strong in stability, attractive in color and excellent in flavor and taste.