The invention discloses a power supply switching circuit of an external power supply and a power supply by a battery and a switching method. The power supply switching circuit comprises a switch, a first voltage reducer, a second voltage reducer, a third voltage reducer, a voltage reference module, a voltage divider, a comparator and a level transfer module, wherein when voltage of the external power supply is not lower than a predetermined voltage threshold value, the level transfer module controls the switch to cut off the battery to a loaded access, and when voltage of the external power supply is lower than the predetermined voltage threshold value, the level transfer module controls the switch to communicate the battery to the loaded access. With the adoption of the power supply switching circuit and the switching method disclosed by the invention, a set of switches is just used to select power supplies of the system, so that the structure of the control circuit is simplified and the reliability of the circuit is improved.