A development system with automatic upgrade function and an automatic upgrade method of a development system are provided. The development system includes a memory apparatus and a processor. The memory apparatus stores multiple application modules, an application software upgrade method package, and multiple software packages corresponding to the application modules. The processor is coupled to the memory apparatus and executes the application software upgrade method package to execute an upgrade development system program, where the processor analyzes versions of the software packages, maintains a software package list according to an analysis result, reads a software repository according to the software package list to obtain a software package in a new version, and installs the software package in the new version to upgrade at least one of the application modules.