The invention provides an LED vertical chip possessing a current blocking structure and a manufacturing method thereof. The method comprises the following steps of providing a growth substrate and successively growing a non-doped GaN layer, an N-type GaN layer, a multi-quantum well layer and a P-type GaN layer on the growth substrate; forming an ITO transparent conducting layer on a P-type GaN layer surface; etching a first opening and a second opening with a gradual change size on the ITO transparent conducting layer; forming a metal electrode layer on an ITO transparent conducting layer surface; providing a bonding substrate and bonding the bonding substrate on a metal electrode layer surface; successively removing the growth substrate and the non-doped GaN layer and forming a cutting channel; and forming an N electrode on an N-type GaN layer surface. In the invention, the first opening is etched at an N-electrode vertical projection position on the ITO transparent conducting layer; the second opening is etched on a periphery of the first opening and the size of the second opening is gradually changed from the first opening to the outside world so that the good current blocking structure is formed, congestion of a current below the N electrode is alleviated, uniform distribution of the current is increased and luminescence performance of a vertical structure LED is increased too.