The invention discloses an iron alloy compound material and a preparation method thereof. The iron alloy compound material is composed of, by mass, 90.5-99.5 parts of FeSiCr and 0.5-9.5 parts of CrO. The preparation method of the iron alloy compound material comprises the steps of mixing, heat treatment, smashing, pelletizing, pressing, sintering and the like. Impedance is improved and energy consumption is reduced while the magnetic conductivity of the iron alloy compound material is maintained by adding a proper amount of CrO.