The invention belongs to the field of powder metallurgy, and relates to an iron-based composite soft magnetic material and a preparation method thereof using a powder metallurgy method to prepare soft magnetic parts of complex shapes in particular. The invention provides a composite soft magnetic material which takes an iron phosphate as an insulating compound and takes boric acid ester as a lubrication binder. The composite soft magnetic material consists of atomized iron-based powder, nanometer iron phosphate and the lubrication binder. The surfaces of the atomized iron-based powder articles are uniformly coated by a layer of nanometer iron phosphate and lubrication binder, wherein the lubrication binder is boric acid ester, and the lubrication binder is 0.01-1.5 percent of the atomized iron-based powder in percentage by weight; and the nanometer iron phosphate is 0.01-1.5 percent of the of the atomized iron-based powder in percentage by weight. The invention has simple preparation technique, low material cost, high density, and high magnetic flux density.