A projection device and a keystone correction method thereof are provided. The keystone correction method is adapted for the projection device and includes the following steps. A first image is obtained. A first line-taking position parameter is determined according to a ratio of a first target edge length to a second target edge length. At least one line of input pixels disposed in a first direction is retrieved from the first image according to the first line-taking position parameter. A first scaling process related to the first direction is performed according to at least one line of input pixels of the first image, such that a line of output pixels of a second image disposed in the first direction is generated. The projection device projects the second image onto a projection screen to display a rectangular projected image.