The invention discloses an AC limiter and a current limiting method thereof. The AC limiter comprises an incoming line end, an outgoing line end, a vacuum arc extinguishing chamber, an operating mechanism, a current limiting reactor, an armature, a static contact, a movable contact, a connection rod, an iron core and a coil. The invention also discloses the current limiting method of the AC limiter. Power switch equipment and the current limiting reactor are integratedly designed, and the integral volume of equipment is reduced; and meanwhile, the reactance of the current limiting reactor is gradually increased during the acting process of the operating mechanism, TRV generated at two ends of the current limiting reactor is reduced, and an energy absorption lightning arrester connected inparallel to the current limiter is omitted. The AC limiter has the advantages of simple and compact structure, low cost, small size and the like.