The invention discloses a coordinated optimization method for transient stability and dynamic stability by excitation gain. The method is applied to a dynamic stability control system, and includes determining a region to be optimized; calculating the static stability limit, the transient stability limit, and the dynamic stability limit of an excitation control system in the region to be optimized; based on the static stability limit, the transient stability limit, and the dynamic stability limit, determining main participating units to be optimized; adjusting the PSS gain parameters of the main participating units to the optimal; adjusting excitation gain parameters to maximize the minimum value among the static stability limit, the transient stability limit and the dynamic stability limit. The method adjusts the excitation gain to coordinate the relationship between the dynamic stability and the transient stability of the system, effectively suppresses the low-frequency oscillation of the system, and improves the overall power transmission capacity.