The invention discloses ternary rare earth epichloro-hydrin rubber and a preparation method thereof. The rubber is a terpolymer of epichlorohydrin, ethylene oxide and unsaturated cyclic ether under the effect of a rare earth catalyst and is 1*10<4>-100*10<4> in weight-average molecular weight; the terpolymer comprises 2-10 percent by mass of combined unsaturated cyclic ether and 15-85 percent by mass of epichlorohydrin; the rare earth catalyst is composed of three parts namely a component A, a component B and a component C, wherein the mole ratio of B to A is (5-50):1, the mole ratio of C to A is (1-10):1, the A is selected from rare earth neodymium organic compounds, the B is selected from aluminium alkyls and the C is selected from compounds containing active hydrogen.