The invention provides an inverted light emitting diode (LED) chip and a fabrication method thereof. The fabrication method comprises the following steps of 1) providing a growth substrate, and sequentially growing an n-type GaN layer, a light emitting layer multi-quantum well and a p-type GaN layer on the growth substrate; 2) forming a first deep groove penetrating through the p-type GaN layer and the light emitting layer multi-quantum well; 3) forming an ohmic contact layer and a current expansion layer on a surface of the p-type GaN layer; 4) forming reflection layers on surfaces of the ohmic contact layer and the current expansion layer; 5) forming reflection layer protection layers at surfaces and inner sides of the reflection layers and the bottom of the first deep groove; 6) forming an aluminum oxide layer on a surface of the structure obtained in the step 5) by an atomic layer deposition method; 7) forming a first opening and a second opening in the aluminum oxide layer; and 8) forming an N electrode in the second opening, and forming P electrodes in the first opening and on a surface of the aluminum oxide layer. The aluminum oxide layer prepared by the atomic layer deposition layer has better insulation performance and metal blocking performance, so that the reliable performance of the inverted chip which is used under a large current is ensured.