The invention discloses an AGC system with wind power participating in peak-shaving and frequency modulation and a control method. A wind power control module is established at a split dispatching AGCend, and a virtual wind power unit corresponding to each provincial dispatching is established in the wind power control module, so as to implement the indirect control of wind power of each provincial dispatching in an area. A wind power control module is established in provincial dispatching AGC to implement wind farm power control. In the split dispatching AGC, a rolling plan is first made onpower generation indexes of each provincial dispatching wind power, the output stability of the virtual wind power units and the stability of the power generation indexes are detected at the same time, and if the virtual wind power units meet that the output and the power generation indexes are both stable, a peak-shaving and frequency modulation mode can be enabled. In the peak-shaving and frequency modulation mode, ACEs are allocated to each virtual wind power unit according to a given ratio. The virtual wind power units are then added with the ACE allocation amount as the frequency modulation increment on the basis of the power generation indexes to obtain the overall control objective, and the provincial dispatching AGC controls the wind farms in the area according to the total controlobjective.