I want to do it all in one function.

You've defined multiplication_or_division to take two parameters, but when you call it:

multiplication_or_division(int(num_1), int(num_2))

you try to pass it variables which don't exist - num_1 and num_2 are declared as the parameters to the multiplication_or_division function and only exists inside that function - you are supposed to pass them into the function so it can process them:

def multiplication_or_division(num_1, num_2):
    if num_1 * num_2 <= 1000:
        print(num_1 * num_2)
    else:
        print(num_1 + num_2)
        
num_1 = input("first number: ")
num_2 = input("second number: ")
multiplication_or_division(int(num_1), int(num_2))

Or not pass them as parameters:

def multiplication_or_division():
    num_1 = int(input("first number: "))
    num_2 = int(input("second number: "))
    if num_1 * num_2 <= 1000:
        print(num_1 * num_2)
    else:
        print(num_1 + num_2)
        
        
multiplication_or_division()