The invention provides a preparation method of iron oxide used for high-grade soft-magnetic materials. The method comprises the following steps: dissolving green vitriol in water, adjusting the pH value of the obtained ferrous sulfate solution to 4-6, allowing the obtained material to stand, carrying out an acid and alkali neutralization reaction on the supernatant obtained after the standing and ammonium bicarbonate, carrying out solid-liquid separation on the obtained acid and alkali reaction products, drying a solid product obtained through the solid-liquid separation, and calcining. Iron oxide with the purity of above 99.4% can be obtained by adopting the method, is very suitable for preparing high-grade soft-magnetic materials in order to realize the changing of green vitriol to valuables, so a problem that a large amount of green vitriol can be effectively processed in the prior art can be solved, and the method has an extremely high industrial application prospect.