The invention discloses a diamond cladded polarization maintaining optical fiber and a manufacturing method thereof. The manufacturing method comprises the following steps that a chemical vapor deposition method is adopted to manufacture a core stress integrated rod, wherein the core stress integrated rod comprises a core layer, a stress layer and an outer cladding layer; the core stress integrated rod is machined to make a cross section diamond; a target rod with a diamond cross section is manufactured and is put inside a quartz glass sleeve, an outer spraying process is adopted to conduct deposition on the quartz glass sleeve, the target rod is removed to form a pure quartz glass diamond inner-hole sleeve after the deposition process is completed; the core stress integrated rod with the diamond cross section is placed in the pure quartz glass diamond inner-hole sleeve to form a polarization maintaining optical fiber perform, the olarization maintaining optical fiber perform is subjected to drawing to form the diamond cladded polarization maintaining optical fiber. The polarization maintaining optical fiber I good in process performance and product quality, high in manufacturing precision and finished product rate, good in machining adaptability and suitable for batch production.