Disclosed is a gap adjustment mechanism (10) used on a paper currency recognition apparatus. The gap adjustment mechanism comprises a rack (11), a magnetic sensor (12) fixedly arranged on the rack, a magnetic floating roll assembly (13) facing a sensing face (120) of the magnetic sensor, and a gap adjustment assembly (14) for adjusting a gap (100) between the sensing face and the magnetic floating roll assembly, wherein the gap adjustment assembly is rotatably connected to the rack and abuts against the magnetic floating roll assembly. Disclosed is a gap adjustment method for using the gap adjustment mechanism to adjust a gap between the sensing face and rollers (132). Disclosed is a paper currency recognition apparatus comprising a paper currency transfer passage and the gap adjustment mechanism. By adjusting the gap between the sensing face of the magnetic sensor and the magnetic floating roll assembly by means of the gap adjustment assembly connected to the rack, the gap can be conveniently and quickly adjusted to a proper size, thereby improving the efficiency of adjustment of the gap between the sensing face of the magnetic sensor and paper currency transfer rolls.