A GPS-based vehicle navigation system and method for properly displaying direction guide information, which represents a target direction, regardless of forward motion or backward motion. The system calculates the current position of the vehicle, and senses the traveling direction of the vehicle. The operation mode of the system is determined. If the operation mode is a "compass mode", the orientation of the traveling direction is calculated based on the current position and the traveling direction. On the other hand, if the operation mode is a "NAVI mode", a target position T separately set is read, and a target direction is calculated based on the current position and the target position T. Next, it is determined whether the motion of the vehicle is forward or backward. If the motion of the vehicle is backward, the direction guide information is corrected by an angle equivalent to 180.degree..