The invention provides a biological fertilizer and a preparation method thereof. The preparation method comprises the steps of: mixing peanut shells, soybean meal and edible fungus residues, conducting steam explosion and solid-liquid separation, and collecting a solid material A and a liquid material A respectively; adding oyster shell powder, livestock and poultry manure, a vegetable leaf and fruit mixture and earthworms into the solid material A, performing composting treatment, and screening out the earthworms to obtain a solid material B; adding potassium fulvate and molasses liquid into the solid material B, inoculating trichoderma and paecilomyces lilacinus, and performing solid fermentation to obtain a solid material C; taking the screened earthworms, crushing, filtering, and collecting filtrate; mixing the liquid material A, the filtrate, brown sugar, a fish protein liquid fertilizer and a multi-element chelating microelement fertilizer, inoculating paenibacillus polymyxa, paenibacillus mucilaginosus and lactic acid bacteria, and performing liquid fermentation to obtain a liquid material B; and mixing the solid material C and the liquid material B, granulating, drying and dewatering. When the biological fertilizer is used for producing kiwi fruits, the fruit quality is good.