The invention discloses fragrant mushroom and beef paste and a preparation method thereof. The fragrant mushroom and beef paste is prepared from the following raw materials in parts by weight: 200-220 parts of beef, 200-220 parts of dried red peppers, 200-220 parts of sweet fermented flour paste, 50-55 parts of fragrant mushrooms, 3-4 parts of white vinegar, 10-12 parts of red yeast rice, 0.8-0.9 part of honeysuckle, 0.5-0.6 part of common cnidium fruits, 0.9-1.2 parts of nelumbo nucifera gaertn, 18-20 parts of table salt, 10-12 parts of white granulated sugar, 3-4 parts of gourmet powder, an appropriate amount of papain and an appropriate amount of xanthan gum. The fragrant mushroom and beef paste disclosed by the invention has specific taste of the fragrant mushrooms and the beef and is delicious and rich in nutrition, various Chinese herbal medicines are added in the processing process, and the fragrant mushroom and beef paste has the efficacies of clearing heat, removing toxicity, dispelling wind and heat, removing summer-heat, relieving restlessness, invigorating spleen-stomach and replenishing qi.