The invention belongs to the preparation field of nano coating powder and in particular relates to a preparation method of small-sized ultra-dispersed nano zirconium oxide-based coating powder. The preparation method is primarily finished by two reactions: room temperature settlement and high-temperature calcining by taking zirconium or inorganic salt of zirconium and rare earth, caustic soda and organic alcohol as raw materials. Nano hydroxide precipitate particles associated with salt crystals are generated by room temperature settlement. The salt crystals cover the periphery of the nanoparticles, so as to prevent growth and agglomeration of the nanoparticles in the high-temperature calcining and decomposing reaction process. The raw materials are low in price, the process is simple to operate, and the method of preventing growth and agglomeration of the nanoparticles is novel and skillful. The obtained nano zirconium oxide-based coating powder has the characteristics of excellent heat isolating ability, phase stability and high-temperature oxidization resistance. The invention provides a novel method for industrially producing the nano zirconium oxide-based coating powder, thereby providing more novel alternative materials for development of long-service life nano thermal barrier coatings.