The invention provides a model test device and a method for a cylinder lateral pressure test in a loose medium. The device comprises a directional chassis capable of accurately controlling a displacement direction, a cylinder structure jointed by T-shaped arc plats, a center control shaft with an inverted frustum of a cone in a middle section, rubber belts for sealing gaps and sliding rollers for reducing friction of a contact surface. The method is based on the device. A horizontal thrust with N times a vertical loading value can be generated with a small vertical loading force, and uniform distribution along the radial direction is ensured; tiny radial displacement can be multiplied for N times for measurement; active and passive limit earth pressure of a cylinder structure with a large diameter can be measured, and the axisymmetric limit equilibrium theory of the loose medium can be verified; and the earth pressure change law of a cylinder structure such as a circular foundation pit, a mine vertical shaft and a highway vertical shaft during a construction process can be simulated, and basis is provided for engineering design and support.