Due to the data privacy security problem within the process of data aggregation of multi-level grids in urban distribution network, a multi-level grid data aggregation algorithm for urban distribution network based on privacy homomorphism is proposed in this paper. The new data is re-acquired through the data format conversion method, and the integrity of data acquisition is ensured. The data aggregation is realized through the process of density threshold function setting, initial clustering center selection and grid clustering. On this basis, the privacy homomorphism technology is used to encrypt the aggregated data to realize the multi-level grid data aggregation of urban distribution network based on privacy homomorphism. The experimental results show that the proposed multi-level grid data aggregation algorithm for urban distribution network based on privacy homomorphism can effectively reduce the number of data loss and tampering after aggregation, improve data encryption efficiency and aggregation efficiency, and reduce data communication costs.