An apparatus and method for recognizing characters of an image captured using a camera in a mobile terminal are provided, wherein an image of a signboard is captured, a text area is extracted from the captured image of the signboard, characters are recognized from the extracted text area, similar characters up to a predetermined priority level are generated for each recognized character of the extracted text area, location information of an area within a predetermined range from a current position of a user is acquired, store names are extracted from the location information, text is generated by combining the similar characters according to weights, the text are compared with the extracted store names, and a comparison result is output.