The invention provides a display panel and a preparation method thereof. The display panel comprises a substrate, a shading layer arranged on the substrate, a buffer layer covering the shading layer,an active layer arranged on the buffer layer, a gate insulating layer, a gate metal layer, an interlayer dielectric layer and a second metal layer arranged on the interlayer dielectric layer, whereinthe gate insulating layer and the gate metal layer are stacked on the active layer, the interlayer dielectric layer is arranged on the buffer layer and covers the gate metal layer; the active layer comprises an active island, the active island comprises a conductor layer and a semiconductor layer which corresponds to and is in contact with the gate insulating layer, and the conductor layer is provided with a protective layer. The aluminum oxide protective layer with a compact structure is generated on the surface of the conductor layer by utilizing a mutual diffusion effect of aluminum atoms and oxygen atoms in the indium gallium zinc oxide, so that the conductor layer after conductor formation is protected, and the conductor layer is prevented from being influenced by the subsequent manufacturing process; and meanwhile, the aluminum oxide has the characteristic of high resistance, so that the capacitance per unit area of the storage capacitor can be effectively improved, and the requirement of high resolution is met.