An apparatus for generating an interleaved stereo image includes a 3D graphics engine, an interleaved data merger and a register. The 3D graphics engine generates a shrunken left-eye image and a shrunken right-eye image of a stereo image based on video source data, the vertical sizes of the shrunken left-eye image and the shrunken right-eye image are shrunk compared with the vertical size of the video source data. The interleaved data merger stores the shrunken left-eye image and the shrunken right-eye image into two consecutive memory segments, and scans the memory segments while displaying the stereo image. A register controls a line number of a display region, so that the rows of the left-eye image shrunk and the right-eye image shrunk arrive at the display region in line-interleaved order. The invention also discloses a method for generating an interleaved stereo image.