A liquid crystal grating and a fabrication method thereof, and a display device are provided. The liquid crystal grating comprises a first substrate (1) and a second substrate (2) provided opposite to each other, and a liquid crystal layer (7); a plate-shaped transparent substrate (3) is provided on the first substrate (1), and a second transparent conductive layer (4), a transparent insulating layer (5) and a first transparent conductive layer (6) are sequentially provided on the second substrate (2); the first transparent conductive layer (6) includes first strip-shaped transparent electrodes (61) and second strip-shaped transparent electrodes (62) which are alternately provided, and there is a gap between the first strip-shaped transparent electrode (61) and the second strip-shaped transparent electrode (62) adjacent to each other; and the second transparent conductive layer (4) includes third strip-shaped transparent electrodes (41) provided at intervals. The liquid crystal grating reduces a black stripe.