An identity recognition system based on compressed signals and a method thereof are provided. When a sensing end is in an identification mode, it continuously measures a physiological identification signal of a user having at least one first predetermined length of time, and performs a compression process on the physiological identification signal having at least one first predetermined length of time to generate a first compressed signal. An identification end receives the first compressed signal, obtains first identification information of the first compressed signal in a discrimination subspace according to a principal eigenvector, and recognizes the first identification signal according to a classification model from a learning end to determine that the user is one of multiple subjects. Therefore, the sensing end uses compressive technology to reduce the energy required to transmit signals, and the identification end recognizes identity without reconstructing the first compressed signal transmitted by the sensing end.