The invention discloses highly dispersed and stably suspended emulsion-containing fine cerium oxide slurry and a preparation method thereof. The slurry is characterized by comprising, by mass, 5%-15% of fine cerium oxide powder and the balance emulsion-containing ethanol-water mixed solution. The emulsion-containing ethanol-water mixed solution is composed of water, ethanol and a polyvinyl acetate emulsion (commonly known as white emulsion), wherein the polyvinyl acetate emulsion accounts for 3%-7% of the emulsion-containing ethanol-water mixed solution by volume percent, and the balance ethanol-water mixed solution is composed of the ethanol and the water with the volume ratio being 1:1. The surface of a material to be modified is coated with the slurry, a fine cerium oxide particle preset layer with the high adhesion property and distributed in a dispersed mode can be formed on the surface of the material to be modified after the slurry is dried and cured, and the demand of introducing the fine powder to the field of particle surface modification technologies like laser melt injection can be met.