The invention provides a denitration catalyst and a preparation method thereof. The denitration catalyst comprises a carrier and active components, wherein the carrier is magnesia-alumina spinel modified with the first rare earth elements, and the active components comprise palladium oxide and iron oxide; in terms of the total weight of the denitration catalyst, palladium oxide accounts for 1wt%-8wt%, iron oxide accounts for 2wt%-5wt%, oxide of the first rare earth elements accounts for 5wt%-15wt%, magnesia accounts for 20wt%-40wt%, and alumina accounts for 18wt%-67wt% ; the first rare earth elements are one or more of lanthanum, cerium, praseodymium, samarium, europium, terbium and dysprosium. The denitration catalyst has quite high denitration capacity under the specific material composition and ratio, the NO conversion rate of the denitration catalyst can be as high as 92%, and the denitration catalyst can resist poisoning of SO2 at the high temperature and has good SO2 poisoning resistant capacity.