The invention discloses a method and circuit for correcting defect pixels in an image signal. First, the invention generates a luminance histogram for all pixels in the image signal and then selects N candidate defect pixels from all pixels according to the luminance histogram and a first threshold. Afterward, the invention sets a window for each candidate defect pixel and then calculates N averaged luminance corresponding to the N windows. Further, the invention judges whether an absolute difference between the luminance of each candidate defect pixel and the corresponding averaged luminance is larger than a second threshold. If it is YES, the candidate defect pixel is recorded as a real defect pixel. Finally, the invention utilizes at least one non-defect pixel around the real defect pixel to correct the real defect pixel. The invention not only compensates the defect pixels accurately and effectively but also reduces required time in correction.