A portable terminal including a touch screen and method for displaying a cursor thereof are provided. The method includes determining whether a capacitance is equal to or greater than a first critical value and is less than a second critical value, if the change of the capacitance is sensed in the touch screen, displaying a cursor in an area where the change of the capacitance is sensed, if the capacitance is equal to or greater than the first critical value and is less than the second critical value, and performing a function corresponding to the area where the cursor is displayed, if the capacitance sensed in the area where the cursor is displayed is equal to or greater than the second critical value.