A display device and a contrast enhancement method thereof are disclosed. The display device includes a display panel on which data lines and gate lines are positioned, a data driving circuit for driving the data lines, a scan driving circuit for driving the gate lines, a timing controller for controlling the data driving circuit and the scan driving circuit, and a data modulation circuit including a local modulation circuit and a global modulation circuit. The local modulation circuit maps luminance components of input digital video data to a luminance transfer curve selected or generated for each pixel based on an average picture level (APL) of each pixel and performs a first modulation on the luminance components of the input digital video data so as to expand a gray level distribution of a specific portion of an input image.