The invention discloses a preparation method of a magnetic iron oxide nanoparticle capable of stably dispersing in water. The preparation method provided by the invention comprises the following steps of weighing 10 to 30g of triethylene glycol or polyethylene glycol having molecular weight of 600 to 20000 or polyethylene glycol monomethyl ether having molecular weight of 600 to 20000, adding 0.15 to 3g of an additive into the 10 to 30g of triethylene glycol or polyethylene glycol having molecular weight of 600 to 20000 or polyethylene glycol monomethyl ether having molecular weight of 600 to 20000, putting the mixture into a three-neck flask, putting the three-neck flask with the mixture on a temperature-control magnetic stirrer, heating the mixture to a temperature of 70 to 90 DEG C, adding 0.1 to 3g of analytically pure iron acetylacetonate into the mixture, stirring for 5 to 15 minutes by a magnetic stir bar, wherein in heating, flowing argon is fed into the three-neck flask for protection, heating to a temperature of 150 to 320 DEG C, keeping the temperature for 20 to 600 minutes by heating, cooling to a temperature below 60 DEG C, adding 50 to 70ml of analytically pure toluene or acetone into the three-neck flask, carrying out magnet adsorption, washing by analytically pure acetone twice, and dissolving precipitates obtained by the previous step in water to obtain the magnetic iron oxide nanoparticles having sizes of 3 to 50nm. The preparation method provided by the invention has simple processes and is conducive to production. The magnetic iron oxide nanoparticle obtained by the preparation method can be utilized for the fields of biotechnology, medicine, catalysis and mechanical lubrication.