The present invention provides fully biodegradable and multi-functional plastic mulch. The plastic mulch comprises, by weight percent: natural biopolymers of starch or derivatives thereof, biodegradable synthetic polymers, an interfacial reinforcer, a compound plasticizer with urea as a main ingredient, a nitrogen phosphorus and potassium compound fertilizer, pesticides, herbicides and trace fertilizers. The plastic mulch of the present invention not only has heat and moisture preservation functions, and is fully biodegradable after use, eliminating the contamination to soil causes by residual plastic mulch debris; and functional additives of fertilizers and nutrients, pesticides, herbicides etc. in the plastic mulch are sustainedly released as the plastic munch degrading, so the plastic mulch has long lasting effects of weed controlling, pest killing, and sustainedly released fertilizing, significantly reducing the use amount of fertilizers and pesticides, decreasing costs, and protecting the ecological environment. The invention also provides a method for preparing the multi-functional plastic mulch.