An image pickup apparatus which is capable of performing automatic adjustment of black balance properly without the need to have a member for fully shielding light. A diaphragm of a lens barrel and an ND filter, which is provided separately from the diaphragm, adjust the amount of light incident on an image pickup device that picks up an image of a subject. Whether the automatic adjustment is possible in present image pickup environment is judged based on evaluation values of a picked-up image obtained in a state where the amounts of incident light are maximized by respective ones of the diaphragm and the ND filter, and a predetermined judgment threshold value which is determined based on a range over which the amount of incident light is adjustable by the diaphragm and a range over which the amount of incident light is adjustable by the ND filter.