The invention relates to the technical field of optical instruments, in particular to an underwater video camera system based on polarization identification and a method thereof. The technical scheme is that the underwater video camera system comprises an underwater light source, a polarization modulation part and an image acquisition and processing part, wherein the underwater light source comprises a semiconductor laser, an optical filter, a polarizer, a polarization rotator and a beam expander; the polarization modulation part comprises an analyzer, a stepper motor, a stepper motor controller and an infrared detector; and the image acquisition and processing part comprises a high-frequency CCD (Charge Coupled Device) video camera, an image acquisition system and a computer. The underwater video camera system has the benefits that with the adoption of the underwater camera system and the method, the contrast degree and the definition of target imaging as well as the target detectionand the identification efficiency can be effectively improved; the polarization imaging can utilize the differences of different target back polarizations to eliminate the interference of background light; and as a means for identifying the target from messy background is provided, the method has remarkable advantage as compared with the commoner method for imaging and identifying the target by using light intensity.