The present invention relates to a red yeast rice biscuit and a preparation method thereof, and belongs to the technical field of food processing. The red yeast rice biscuit is mainly composed of the following components in parts by weight: 100 parts of flour, 1 part of edible salt, 5 parts of milk powder, 0.5 part of ammonium bicarbonate, 0.5 part of baking soda, 22 parts of water, 25 parts of eggs, 10-20 parts of vegetable oil, 1-3 parts of red yeast rice and 8-16 parts of white granulated sugar. The preparation method includes the following steps: grinding the red yeast rice into powder, mixing all the components, stirring and preparing dough, keeping the dough stand still, rolling the dough into biscuits, and baking and naturally cooling the biscuits. The red yeast biscuits not only introduce the safe, nutritious and health benefiting effects of the monascus purpureus pigment, but also can optimize the matching ratio of the monascus purpureus pigment, vegetable oil and white granulated sugar, thus the biscuits have smooth appearance, better luster, and moderate crispy and soft mouthfeel, and emit better fragrance.