The invention discloses an interactive panoramic video transcoding and playing method based on space telescopic coding and a system. The method comprises steps of diving an original video into multiple space layer video data with different resolutions; diving data of each layer according to a tile form; according to an operation instruction of a user, projecting ROI into the video in each layer; based on the principle that the video zooming coefficient is closest to 1, selecting the most proper space layer video data and the corresponding Tile to carry out transcoding rewriting; and filling unselected data with skip data, thereby reducing bandwidth and ensuring compatibility. According to the invention, video data with the most proper play window resolution is played to the user according to different bandwidth environments; the method and the system are characterized in that the space is telescopic; and the space resolution is self-adaptive; and the user is enabled to well enjoy a natural scene of an interactive video or a three-dimensional immersive vision feelings of a virtual scene, seamless viewpoint switching and flexible human-machine interaction features.