The invention discloses a gypsum mold formula for casting a magnesium alloy and a preparation method thereof, relating to preparation of a gypsum mold for casting a magnesium alloy. The gypsum mold formula comprises an additive component consisting of four basic components, including alpha-semihydrated gypsum, quartz powder, bauxite and magnesium sulfate as well as seven substances such as trisodium orthophosphate, barium chloride, a water reducing agent and the like. The invention further discloses a preparation method for the gypsum mold formula. Due to the adoption of scale graphite, oxidation of the magnesium alloy is effectively prevented; the water reducing agent is added into the formula, so that the fluidity of gypsum slurry is improved, the water consumption is lowered by 30 percent simultaneously, and the gypsum mold strength and drying efficiency are increased; the linear shrinkage of the gypsum mold can be remarkably lowered by using the gypsum mold formula together with barium chloride and urea; moreover, a solvent component consisting of tap water is adopted, so that the problems of high water consumption, poor fluidity, low strength, large size deformation, difficulty in breaking and the like existing in an ordinary gypsum mold are solved; and meanwhile, the problems of oxidization and combustion of the magnesium alloy are solved.