The invention provides an image compensation and correction method and a banknote detection and identification device. The image compensation and correction method is applied to the banknote detection and identification device. The banknote detection and identification device comprises a micro control unit, a field programmable gate array, an AD (Analog to Digital) chip, a driving circuit, a static random access memory and a contact image sensor, wherein the field programmable gate array is connected with the micro control unit, the AD chip, the driving circuit and the static random access memory are connected with the field programmable gate array respectively, and the contact image sensor is connected with the AD chip and the driving circuit respectively. A compensation and correction lookup table is pre-stored in the static random access memory and the field programmable gate array accesses the static random access memory to obtain banknote compensation and correction data corresponding to banknote image pixels and transmit to the micro control unit, so that the micro control unit directly obtains the banknote compensation and correction data from the field programmable gate array without performing compensation and correction on the obtained banknote image pixels any more, accordingly the system performance of the micro control unit is improved, and then the working efficiency of the banknote detection and identification device is improved.