The invention provides a method for compacting data transmitted with drilling well mud pulse. The method comprises the following steps that step 1, an encoding method adopted by a downhole instrument is a PPM (pulse position modulation) encoding method; step 2, corresponding log parameters and transmission speed are configured for the downhole instrument; step 3, each measuring pup joint of a log instrument starts to acquire data; step 4, subtraction is performed on the subsequently acquired data and a first group of data, and the difference value is stored by using one byte; and step 5, if the difference value overflows, the group of data acquired during overflow serves as the first group of data, and circulation is sequentially performed, and if the difference value does not overflow, the difference value serves as data, after being subjected to PPM encoding, the data is sent to the ground, circulation is sequentially performed, and the data in the step is stopped to be acquired and uploaded until a pump closing signal is detected. The method has the advantages that the uploading efficiency of a downhole signal is improved, so that geosteering and formation evaluation are carried out to improve the decision ability of a field drilled well.