The invention provides Al-Zn-Mg-Cu damping alloy and a preparation method thereof. Regarding the damping alloy, the inner friction value of the damping alloy is between 0.002 and 0.023, the tensile strength is between 460 and 620Mpa, the yield strength is between 450 and 590Mpa, and the elongation is between 9.3 and 12.2 percent. The method for preparing the damping alloy comprises the following steps that: 25 to 35 percent by volume of Al-Zn-Mg-Cu alloy powder with particle size range of between 0.075 and 0.061mm; 60 to 70 percent by volume of Al-Zn-Mg-Cu alloy powder with the particle size range of between 0.031 and 0.053mm, and 3 to 7 percent by volume of powdered graphite with the particle size range of between 0.030 and 0.038mm are mixed into mixture; and the mixture is prepared into the damping alloy through ball milling, drying, canning vacuumizing, hot press forming, extruding and aging treatment. The damping alloy prepared by the preparation method solves the technical problem of poor corrosion resistance of the damping alloy in the prior art, and simultaneously improves the strength and elongation of the damping alloy.