The invention discloses a Yao-nationality medicated bath natural handmade soap and a preparation method thereof. The Yao-nationality medicated bath natural handmade soap is prepared from the following raw materials in parts by weight: 10-30 parts of Yao-nationality medicated bath extracting solution, 2-8 parts of sodium alginate, 0.5-2.5 parts of essence, 1-5 parts of refined salt and 70-90 parts of soap base. The preparation method comprises the following steps: preparing the Yao-nationality medicated bath extracting solution, treating with the soap base, and mixing to obtain the finished product. The Yao-nationality medicated bath extracting solution prepared from Chinese soapberry and traditional Chinese medicine powder has the effects of promoting blood circulation and controlling skin diseases. The effective components in the Yao-nationality medicated bath extracting solution have killing and inhibiting actions on Staphylococcus aureus, Salmonella and Escherichia coli, so no preservative or bacteriostatic agent is added in the handmade soap preparation process, thereby solving the problem of damage to the skin of the additive. The handmade soap has favorable bubbling capacity and dirt-removing power, has the functions of killing bacteria, relieving itching, whitening the skin, removing poxes, controlling the skin diseases and the like. The preparation method is simple, is low in cost and can implement large-scale production.