The invention discloses a hydraulic retarder with a holding braking function and a control method thereof. The hydraulic retarder comprises a retarder body, a drive system, a control system, and a heat dissipation system, wherein the output end of the drive system is connected with a movable wheel axle of the retarder body, and the input end of the drive system is connected with the output end of the retarder or an engine. <0}{0><}0{>The working liquid of the hydraulic retarder with the holding braking function is sealed in a working cavity and is not needed to flow circularly, so that a lot of automobile energy sources can be well saved; under the condition that the working liquid is sealed in the working cavity, the hydraulic retarder is capable of realizing the holding braking function, and the hydraulic retarder manufacturing difficulty is reduced; the drive system has functions of increasing the speed and reducing the torque, so that the braking capability of the hydraulic retarder is enhanced, and the size of the working cavity is well reduced.