The invention provides an intersection dynamic signal timing optimization method based on time headway. The method comprises the following steps: 1, according to monitored vehicle passing data, an intersection phase ID is acquired; 2, a lane group is defined, that is, in the certain phase, all lanes with right of way in the same road section are defined as one lane group; 3, a core release lane in the phase is searched in the lane group, and if all phases of a lane have the right of way, the lane is removed from the lane group; 4, the flow of each lane in the lane group is calculated; 5, the time headway for phase key lanes in one period is acquired; and 6, the phase waste time is calculated, and the time of a green light is correspondingly adjusted. Through the time headway change in one period, an intersection passing signal timing scheme is analyzed, the corresponding given timing scheme is dynamically optimized in real time, and an important role is played in improvement of the operation efficiency of the whole traffic system.