The invention provides a casting magnesium alloy comprising the components: 0.8-2wt% of Zn, 0.2-0.6wt% of Zr, 0.05-0.55wt% of RE and the balance of Mg and unavoidable impurities, wherein RE is Yb or Y. An Mg-Zn-Zr casting magnesium alloy is modified by Yb or Y with a relatively large atomic radius in a heavy rare earth element, and due to the addition of trace Yb or Y, not only is a relatively high solid solution strengthening effect generated, but also the stacking fault energy of the magnesium alloy can also be reduced; and the reduction of the stacking fault energy is beneficial to the activation of nonbasal slip and the promotion of formation of twin crystals and stacking faults, and furthermore, the plasticity and work hardening capacity of the magnesium alloy are improved. Therefore, the casting magnesium alloy obtained under the combined actions of various components and component contents has relatively high plasticity. The invention also provides a preparation method of the casting magnesium alloy.