The invention relates to a lanolin-containing handmade soap and a preparation method thereof. The handmade soap comprises, by weight, 45-55 parts of a soap base, 10-20 parts of milk, 5-15 parts of beeswax, 10-20 parts of olive oil and 10-20 parts of lanolin. The handmade soap can remove soil dirt and skin secretions on the skin surface, and has excellent beautifying and whitening effects. The inventory advantage of abundant sheep in Tibet is fully used to prepare the lanolin, and good conditions are provided for the development of the handmade soap, so the comprehensive utilization rate of agriculture and livestock byproduct resources is further increased, and the income increase of farmers and herdsmen in the main sheep producing area in Tibet is promoted.