The invention discloses a water-soluble crude oil demulsifier sulfonated hydroxyl-terminated polybutadiene and a preparation method thereof. The preparation method comprises the following two steps: (1) preparing a sulfonating agent acetyl sulfate: mixing a certain volume of concentrated sulfuric acid with acetic anhydride to react for 0.5-2 hours, thus obtaining the sulfonating agent acetyl sulfate; (2) preparing sulfonated hydroxyl-terminated polybutadiene: dissolving a certain mass of hydroxyl-terminated polybutadiene in a certain volume of tetrahydrofuran to prepare a tetrahydrofuran solution with hydroxyl-terminated polybutadiene concentration of 10-50%(w/V); and then dropwise adding a certain volume of acetyl sulfate while stirring, continuously stirring the solution at room temperature to react for 1-3 hours, then adding a certain volume of water, neutralizing the solution with a sodium hydroxide solution until the pH value is 7-8, and finally carrying out reduced pressure distillation to remove tetrahydrofuran and water, thus obtaining the sulfonated hydroxyl-terminated polybutadiene product which is a yellow gelatinous substance. The demulsifier has the advantages of good water solubility, small usage amount, high water output rate, clear drained water, simple preparation process, no organic solvents and safety and environment-friendliness in use.