The invention relates to a system for realizing network extension and protection functions with wave-division multiplexing annular optical access networks and a method for realizing the network extension and protection functions with the wave-division multiplexing annular optical access networks. The system is characterized in that an OLT (optical link terminal) is connected with M RNs (remote nodes) through an optical fiber to form an annular network, and the remote nodes are connected with ONUs (optical network units) through a distributed optical fiber, wherein the optical link terminal mainly comprises Q=Mq (1+n) optical transmitters, Q receivers, Mq transmitting C wave-band wavelength, Mnq transmitting L wave-band wavelength, Q 1X2 optical switches, three AWGs (arrayed waveguide gratings) of an identical structure and with Q ports, two EDFAs (erbium-doped fiber amplifiers), two optical circulators and a 2X1 coupler; and each remote node on a main ring mainly comprises a 2X2 optical switch, a 1X2 optical switch, two WBs (wavelength blockers), a CWDM (coarse wavelength division multiplexing), four common circulators, a closed circulator, six couplers and an arrayed waveguide grating. A feeder optical fiber is protected by the aid of use of the optical switches at the OLT end and designs of the annular structures and RN structures. By means of effective arrangement of the RN nodes, network scale extension can be realized, typical annular tangent topological structures are realized, network coverage area is greatly widened, and the quantity of users is greatly increased. The system realizes dynamic dispatching of the wavelength by adjusting the wavelength blockers and changing operating ports of the arrayed waveguide gratings, and achieves balance between the cost and the performance.