An auto gain adjusting device and method is disclosed. The auto gain adjusting device comprises a predistorter, a gain unit, a power amplifier, a receiving unit and a calculation unit. The predistorter generates a plurality of test signals in a calibration mode, wherein the powers between a current test signal and a previous test signal includes a first difference value. The gain unit provides a substantially constant gain value to the current test signal and the previous test signal to generate a current amplified test signal and a previous amplified test signal. The power amplifier amplifies the current amplified test signal and the previous amplified test signal to generate a first transmitting signal and a second transmitting signal. The receiving unit converts the first transmitting signal and the second transmitting signal into a first baseband signal and a second baseband signal respectively. The calculation unit calculates a second difference value between powers of the first baseband signal and the second baseband signal, and compares the second difference value with the first difference value to determine whether the substantially constant gain value causes the plurality of test signals to be operated in a linear region and a compression region of the power amplifier.