The invention relates to a liquid fuel and a preparation method thereof. The liquid fuel is mainly prepared from the following raw materials in portion by mass: 150 to 300 portions of water, 650 to 850 portions of methanol, 5 to 20 portions of butyl acetate, 5 to 20 portions of sodium hydroxide, 2 to 10 portions of hexamethylenetetramine, 10 to 30 portions of hydrogen peroxide with a mass concentration of 30 percent, and 50 to 150 portions of ethanol. The liquid fuel has low volatility and steady performance, is safe during the transportation and storage when being distributed to users due to the high temperature resistance, is difficult to ignite if no open flame exists, does not splash liquids and fumigate eyes during the use, can completely burn, is difficult to generate harmful gas such as formaldehyde and the like, has no smoke, no toxicity, no carbon deposition, no pot blackening, violent fire, high heat energy, no pressure, and no explosion danger, has a combustion calorie more than 9,500kcal / kg, can be extinguished by water during the fire extinguishing, and has the characteristics of cleanliness, environment protection, safety, simple and convenient production, and low production cost. The liquid fuel can substitute diesel oil and liquefied gas, and is suitable to be used by diesel furnaces, liquefied gas furnaces, boilers and the like.