A system and method for controlling an on-board battery charger of an eco-friendly vehicle are provided. In the method, when instantaneous interruption of electric power occurs in an AC input power source, a DC-DC controller adjusts an output current instruction to be limited to the minimum charging power, and a power factor corrector (PFC) controller outputs a voltage instruction to a first capacitor (DC link capacitor) connected to an output terminal of the PFC controller to be updated to zero (0) or an actual value of the DC link capacitor. When the AC input power source is then restored, the PFC controller outputs the voltage instruction to the first capacitor to be increased to the existing voltage instruction with a predetermined slope, to smoothly perform the charging operation of the on-board battery charger without pause.