The invention discloses a method of identifying a brain electricity relaxation degree. The method comprises the following steps of carrying out Kalman filtering on a brain electricity sequence signal to be processed and acquiring a first signal of each brain wave; based on an autoregression model, carrying out signal extraction on the received brain electricity sequence signal to be processed and acquiring a second signal corresponding to each brain wave; based on a Kalman residual of the first signal, acquiring first weight factor corresponding to the first signal; based on a quality index of the second signal, acquiring a second weight factor corresponding to the second signal; according to the first signal, the first weight factor, the second signal and the second weight factor, calculating and acquiring a third signal; and carrying out characteristic extraction on the third signal of each brain wave, and according to a characteristic quantity, carrying out classification identification and acquiring a brain electricity relaxation degree. The invention also provides a system of identifying the brain electricity relaxation degree. The brain wave can be accurately extracted so as to realize accurate brain electricity relaxation degree identification.