The invention relates to a method for processing oil-bearing mud, which comprises the following steps: firstly, mixing and stirring oil-bearing mud and right amount of water in a washer under the condition of heating, stewing, separating out oil phase and a first sludge layer, secondly, stirring in a middle tank, heating oil phase from the washer, stewing, and then discharging water and sludge on the lower portion, keeping oil phase on the upper portion, thirdly, finely separating oil phase which is kept in the middle tank in a centrifugal machine through a centrifugal effect, discharging oil phase which is separated into an oil storage tank, fourthly, stewing oil products which is from the centrifugal machine after dewatering and desliming in the oil storage tank, and getting recovery oil, fifthly, cavitating first mud residue from the washer in a mud residue processor, stripping residual oil in the first mud residue, and discharging oil phase on the upper portion of the mud residue processor into the middle tank. The invention also relates to a system which utilizes the method to process oil-bearing mud. Oil-bearing rate of oil-bearing mud which is processed by the method and the system of the invention is below 4%.