The invention discloses a fully synthesized magnesium alloy cutting fluid and a preparation method thereof. The cutting fluid is prepared from the following raw materials: sorbitan monooleate, polyethylene glycol oleate, diglycolamine, dipotassium ethylene diamine tetraacetate, sodium fatty alcohol polyoxyethylene ether sulphate, sodium oleate, potassium naphthenate, dodecyl dimethyl benzyl ammonium chloride, triethanolamine oleate, caprylic-capric acid, cocoanut fatty acid diethanolamide, diethyltriamine pentaacetic acid, butyl carbitol, diisopropanolamine, octaphenyl polyoxyethylene ether, ricinoleic acid, sorbitan fatty acid, Baishade BIT-10, additives and deionized water. The fully synthesized magnesium alloy cutting fluid disclosed by the invention further has excellent performances in magnesium corrosion resistance, corrosion resistance, lubricity, rust prevention, defoaming property, service cycle and the like.