A head mounted display (HMD) and an image generating method thereof are provided. The HMD includes a display device, an optical converter, an optical shutter and an optical engine. The display device receives an AR image and/or an external image, and transmits a display image along a projection direction. The optical converter receives the display image and adjusts an output angle to project an output image to a target area. The optical shutter opens a transmission path for the external image to the display device during a first time period, and inhibits the transmission path during a second time period, where the first time period is longer than the second time period. A first luminance of the AR image provided by the optical engine in the first time period is lower than a second luminance of the AR image provided by the optical engine in the second time period.