The invention relates to a cutoff and drainage system for a permafrost tunnel edge and heading slope and a cutting slope and a construction method thereof. The most important work in the engineering construction of the permafrost area edge and heading slope is the prevention of freezing and thawing, a water retaining bank is used for treating surface water, the underground thawing water is drained through a heat-insulation blind ditch, and is simply cut off by a water preventing plate, and a longitudinal drainage channel is not provided for the thawing water. The cutoff and drainage system is provided with a trench, wherein the trench is positioned at the top of the edge and heading slope, the bottom of the trench is provided with a heat-insulation water seepage blind ditch, the original foundation pit soil is backfilled into the heat-insulation water seepage blind ditch, water separating layers are paved above the original foundation pit soil and on the side wall, near the edge and heading slope, of the trench, graded crushed stones which are integrally coated with a non-woven geotextile are arranged in the remained space of the trench, and cohesive soil is backfilled above the graded crushed stones. The cutoff and drainage system has the advantages that the water retaining bank is combined with the heat-insulation water seepage blind ditch to fully treat the surface water and the underground thawing water; the structure type is simple and reliable, and the drainage performance is good; the long-time servicing performance is good, and the curing cost is reduced; and the practicality, the endurance and the little maintenance are realized.