The invention relates to polybutylece terephthalate (PBT) coated functional powder and a preparation method thereof. The PBT coated functional powder has a core-shell structure, an inner core is the functional powder, and a shell is PBT resin. The functional powder is one or more of carbon nano tube, nano titanium dioxide, tourmaline powder, nano silver series antibacterial agent, nano silicon oxide and fluorescent powder; and the particle diameter of the functional powder is 20 to 80 nm. A layer of titanium catalyst is carried on the surface of the functional powder; and a coating method comprises the following steps of: polymerizing cyclic butylene terephthalate (CBT) on the surface of the functional powder to generate the PBT resin, and atomizing, wherein the mass ratio of the PBT resin to the functional powder is (2-4):1. The PBT coated functional powder which is obtained by a technology is high in compatibility with polyethylene terephthalate (PET) thermoplastic resin, polytrimethylene terephthalate (PTT) thermoplastic resin, poly A (PA) 6 thermoplastic resin and other thermoplastic resin, the dispersibility of the functional powder in organic resin is greatly improved, and the PBT coated functional powder has good application prospect in the aspect of development of functional fibers.