A backward compression system and a backward compression method are provided. By using the system and the method, under limited memory space, a relationship between input data and previous data is identified in real time, the input data or previous data is encoded according to the relationship, and the order of data output is such that the encoded data is output first and the complete data is output second. When the output data is stored in circular memory and the memory gets full, the oldest encoded data is overwritten first, and the complete data is not overwritten until all the related encoded data is overwritten. Therefore, more original data can be preserved after decompression. Thus, system signals can be compressed and utilization of limited memory space can be improved.