The present invention provides a water-soluble cutting liquid for fixed abrasive material line cutting, wherein the water-soluble cutting liquid is characterized by comprising, by weight, 0.1-10% of an non-ionic surfactant, 2-20% of an anti-rust sterilization agent, 4-20% of a lubricant, 0.1-2% of an antifoaming agent, and the balance of water. According to the present invention, the cutting liquid with performances of wetting, cleaning, cooling and rust resistance is achieved, is applicable for fixed abrasive material line cutting, and has characteristics of simple process and operation, no corrosion, no bubbling, no rust, no harm on human body, and low cost. The present invention further provides a preparation method for the water-soluble cooling liquid for fixed abrasive material line cutting.