The invention discloses a light emitting diode epitaxial wafer and a preparation method thereof, belonging to the field of semiconductor technology. The LED epitaxial wafer comprises a substrate, a buffer layer, an N-type semiconductor layer, a stress relief layer, an active layer and a P-type semiconductor layer, wherein the buffer layer, the N-type semiconductor layer, the stress relief layer, the active layer and the P-type semiconductor layer are laminated on the substrate in sequence; the stress relief layer comprises a plurality of first sub-layers and a plurality of second sub-layers, wherein the plurality of first sub-layers and the plurality of second sub-layers are alternately stacked; the material of the first sub-layer is zinc oxide doped with aluminum element, and the materialof the second sub-layer is gallium nitride doped with indium element. The invention can achieve good stress release effect, effectively prevent the stress and defects generated by lattice mismatch between sapphire and gallium nitride from extending to the active layer, is conducive to the radiation recombination luminescence of electrons and holes in the active layer, and improves the luminescence efficiency of the light emitting diode.