An image processing apparatus and image processing method are disclosed. The image processing apparatus includes an image input unit receiving input image data to obtain grayscale values of a display image, a modeling unit calculating a luminance change ratio for each grayscale value according to a change of an on-pixel ratio and a final luminance reflected by the luminance change ratio, a grayscale re-mapping unit determining a compensation grayscale value for compensating a luminance change ratio according to the on-pixel ratio of the input image data to display a target luminance corresponding to a predetermined grayscale value included in grayscale information of the input image data in the on-pixel ratio condition of the input image data, and an image output unit outputting an output image data compensating the input image data by the compensation grayscale value.