The invention relates to a method for realizing the functions of character extraction and automatic translation of a digital camera. The method generates a picture by taking a picture of characters, extracts the characters through image processing technology, generates a text file, uses a translation algorithm to translate the section of the characters into Chinese, and displays the translated result on an LCD. The method comprises the following steps: firstly, setting the camera into a translation mode according a corresponding item in a menu; secondly, taking the photo of the characters; thirdly, automatically using a character extraction algorithm to extract the characters and generating the text file by the camera; fourthly, automatically utilizing the prior translation algorithm to translate the characters by the camera; and fifthly, displaying the translated result on the LCD. The method can directly utilize the prior hardware resource of the digital camera, does not need to addany hardware cost, makes the digital camera have the functions of character extraction and automatic translation, and can bring convenience for users.