The invention relates to a speech recognition system and method with cepstral noise subtraction. The speech recognition system and method utilize a first scalar coefficient, a second scalar coefficient, and a determining condition to limit the process for the cepstral feature vector, so as to avoid excessive enhancement or subtraction in the cepstral feature vector, so that the operation of the cepstral feature vector is performed properly to improve the anti-noise ability in speech recognition. Furthermore, the speech recognition system and method can be applied in any environment, and have a low complexity and can be easily integrated into other systems, so as to provide the user with a more reliable and stable speech recognition result.