A method of handling measurement capability for a mobile device capable of communicating with a network through a plurality of component carriers in a wireless communication system is disclosed. The method comprises sending a capability information message indicating a component carrier capability of the mobile device to the network, wherein the component carrier capability indicates the number of the plurality of component carriers, performing an inter-frequency measurement either on a first component carrier of the plurality of component carriers or on all of the plurality of component carriers, wherein the inter-frequency measurement is performed on the first component carrier when a measurement gap is configured to the first component carrier by the network and the inter-frequency measurement is performed on all of the plurality of component carriers when the measurement gap is configured to all of the plurality of component carriers by the network.