The invention provides environment-friendly water-based drilling fluid and a preparation method thereof. The water-based drilling fluid is prepared from the following raw materials in parts by weight: 100 parts of water, 1-5 parts of bentonite, 0.05-0.4 part of sodium carbonate, 0.5-3 parts of a filtrate reducer A, 0.2-3 parts of a filtrate reducer B, 0.1-1 part of a viscosity/yield boosting agent, 0.5-4 parts of an inhibitor, 1-5 parts of a lubricant, 2-6 parts of a micro/nano particle plugging agent and 0-200 parts of weighting materials. The preparation method of the drilling fluid comprises the steps of adding bentonite and sodium carbonate into water; sequentially adding the filtrate reducer A, the filtrate reducer B, the viscosity/yield boosting agent, the inhibitor, the lubricant and the micro/nano particle plugging agent; adjusting the pH value by using sodium carbonate; selectively adding the weighting materials until the density reaches the drilling requirements. The resisting temperature of the drilling fluid can reach 150 DEG C, EC50 is greater than 3.0*10<4>mg/L, and the drilling fluid is nontoxic and environmentally friendly and has good rheological property, filtration reducing property, rejection capability, lubricating property, pollution resistance and reservoir protection effect.