An input apparatus and method in a portable terminal are provided. The input apparatus includes a display unit, having a plurality of pixels; an optical sensing unit for forming a grid of optical signals in a predetermined area corresponding to the pixels of the display unit and producing location information of a pointer in the grid of optical signals; a coordinate converter for converting the location information of the pointer into coordinate information in the display unit and computing a location of a cursor in the display unit on the basis of the coordinate information; and a controller for controlling display of the cursor at the computed location in the display unit, wherein the controller identifies an operation mode of the input apparatus, and operates a portion of the optical sensing unit for key recognition if the operation mode is a key input mode.