An image registration system, and a method of operation of an image registration system thereof, including: an imaging unit for obtaining a pre-operation non-invasive imaging volume and for obtaining an intra-operation non-invasive imaging volume; and a processing unit including: a rigid registration module for generating a rigid registered volume based on the pre-operation non-invasive imaging volume, a region of interest module for isolating a region of interest from the intra-operation non-invasive imaging volume, a point generation module, coupled to the region of interest module, for determining feature points of the region of interest, an optimization module, coupled to the point generation module, for matching the feature points with corresponding points of the rigid registered volume for generating a matched point cloud, and an interpolation module, coupled to the optimization module, for generating a non-rigid registered volume based on the matched point cloud for display on a display interface.