A display system for displaying a panoramic image and an operation method thereof are provided. The display system for displaying a panoramic image includes N projectors and a controller. The N projectors project N sub-images according to N image data and form a panoramic image. Each sub-image has a sub-image overlapping area, so that two adjacent sub-images of the N sub-images partially overlap, and that a first sub-image and an Nth sub-image of the N sub-images partially overlap. The controller copies a first edge image corresponding to a first edge of an original image and connects the first edge image to a second edge of the original image that is opposite to the first edge, so as to generate an extended image corresponding to the sub-image overlapping area. The controller slices an adjusted image containing the original image and the extended image to generate the N image data.