The invention relates to a liquid cycloaliphatic epoxy resin and a preparation method thereof, in particular to a liquid cycloaliphatic epoxy resin containing phosphorus difunctional and a preparation method thereof. The chemical constitution of the liquid cycloaliphatic epoxy resin containing phosphorus difunctional is shown by the formula, wherein X is C0-C12 alkyl or aryl, R1 and R2 are hydrogen, nitro, halogen or C1-C6 alkyl, and m is an integer from 0 to 5. The method comprises the following steps: industrialized raw materials, namely a cyclohexene alcohol compound and dihalo phenyl phosphate or a derivative of the dihalo phenyl phosphate are adopted to perform a reaction in the presence of an alkaline matter (an acid-binding agent) to obtain a cycloaliphatic alkene alcohol phosphate ester; and the cycloaliphatic alkene alcohol phosphate ester is epoxidized to obtain the liquid cycloaliphatic epoxy resin. The cycloaliphatic epoxy resin has the simple preparation method, easily obtained raw materials, and flame retardation due to high phosphorus content. The cycloaliphatic epoxy resin can be applied to the fields of integrated circuit encapsulation, integrated circuit base plate material preparation, and the like.