An augmented reality system and a display method for anchoring a virtual object thereof are provided. An image sequence is captured from an electronic equipment through an image capturing device on a head-mounted device. The image sequence includes an ith and an (i+1)th environmental image. The electronic equipment includes a component device. A feature matching operation is performed on the ith environmental image and a first template image to obtain a matching result. In response to the matching result meeting a preset condition, a second template image extending from a matching image block of the component device is captured from the ith environmental image. A feature matching operation is performed on the (i+1)th environmental image and the second template image to display a virtual object through the head-mounted device according to another matching result. The virtual object is displayed as being anchored to the electronic equipment in a real scene.