A method and portable terminal for automatically controlling an output volume of audio output of a head phone when the head phone is connected to a portable terminal are provided. The method of controlling an audio output in a portable terminal, includes outputting a test audio signal to a head phone for a preset playback time when the head phone is connected to the portable terminal; collecting neighboring noise interval information and impedance interval information of the head phone while the test audio signal is output to the head phone; determining impedance of the head phone based on the neighboring noise interval information and the impedance interval information; determining a gain of an audio signal based on the determined impedance; and amplifying the audio signal in proportion to the determined gain, and outputting the amplified audio signal to the head phone.