The invention provides an AGV automatic guiding system and a method thereof. The system includes a center control system (1), an on-site controller (2), a communication module (3), a motor driving module (4), a walking mechanism (5), a guiding mechanism (6), four magnetic sensors (7) and two magnetic guide rails (8). According to the invention, two magnetic guide rails of different frequencies are arranged, and under a normal operation state, the four magnetic sensors are disposed on an AGV bottom disc in a rectangular shape and separately reads the frequencies of the left magnetic guide rail and the right magnetic guide rail so as to prevent extra interference; when a small vehicle drives offset a rail, an offset angle can be calculated in combination with the time when a magnetic sensor loses a signal, the velocity of the small vehicle and the distance between the guide rails. The low complexity of the calculation can effectively lower operation task volume of the controller. Therefore, under same hardware conditions, the system and the method can effectively shorten control delay and lower guiding errors.