The invention discloses cross yarn looped pile structure knitted fabric and a processing method thereof. The looped pile structure part of the fabric is made of 100% spun polyester threads with single fiber length longer than 7cm, the looped pile structure part is knitted on a single knit circular knitting machine, needles in three paths are arranged in the following manner that one needle is arranged in the first path, two needles are arranged in the second path, one needle is arranged in the third path, then two needles are arranged in the second path, and in this way the six needles are arranged in a circulated mode. The knitting processes is that four paths are in one circulation, wherein 100% polyester yarns with the single fiber length longer than 7cm are threaded in the first path and the third path, tucking knitting is conducted on the needle in the first path and the needle in the third path, and a floating looped pile structure stretching over five needles is formed. The first path and the third path form a looped pile at an interval of two needles in the lateral direction. Normal yarns are threaded in the first path and the fourth path, looping is conducted on the needles, a loop knitting plain weave structure is formed through all needle knitting, and the looped pile on the whole fabric face is in a rhombus arrangement state. The cross yarn looped pile structure knitted fabric has the advantages of being large in space of the looped pile structure, long in looping yarn length and low in hairiness and not influencing needle replacement.