The invention provides a preparation method of a silver alloy bonding wire. The method comprises the following steps of plating a gold coating on the surface of a silver alloy wire, finely drawing a wire and annealing so as to obtain a silver alloy bonding wire. The ratio of the diameter of the silver alloy wire to the thickness of the gold coating is 0.1*10<3>-1.5*10<3> : 0.01-0.5. The annealing temperature ranges from 200 DEG C to 800 DEG C. According to the invention, the gold coating is plated on the surface of the silver alloy wire, and the use amount of the gold is controlled. Meanwhile, the heat treatment and the annealing are carried out, so that the gold coating is diffused to the outer layer of a silver middle shaft. Therefore, the silver alloy bonding wire is resistant to corrosion and has long-term bonding reliability. The silver alloy bonding wire is good in light reflectivity, flexibility and push-pull force. When the alloy bonding wire is exposed in H2S, no corrosion point is observed. The silver alloy bonding wire passes the reliability test of an LED. After the silver alloy bonding wire is tested for 10000 hours during an anti-aging equivalent test in a laboratory, the silver alloy bonding wire still has a certain bonding strength. The tensile breaking force of the silver alloy bonding wire is 8 - 12 g, and the ball pushing shearing force of the silver alloy bonding wire is 35 - 45 g.