The invention relates to an identity authentication system with biological characteristic recognition function and an authentication method thereof. The system comprises a CPU main control unit (MCU), a system control unit, a hardware encryption and decryption unit, an on-chip memory with MPU protection function, an external communication unit, a man-machine interaction control unit, an external memory control unit, a PKI system and a sensor system, wherein the on-chip memory is used for realizing secure storage and access of such data as personal information, data, procedures, keys, system parameters, etc. The invention has the following beneficial effects: 1. solving the problem of security holes of pins of existing security products, radically solving the problem of authentication of personal identity and having high security; 2. guaranteeing the personal information of the user not to be cracked by logic attacks, side frequency attacks, physical attacks and other means through the hardware; 3. guaranteeing the personal information of the user to be securely stored and not to be cracked by splitting and photographing the chips and other means through the hardware; and 4. effectively avoiding the leak that the transaction information is tampered when the transaction information is sent to the personal identity authentication terminal.