An audio compression method using wavelet packet transform (WPT) in MPEG1 layer 3 (hereinafter referred to as "MP3") and a system thereof are provided. The method comprises calculating perceptual energy by analyzing audio samples which are input based on a psychoacoustic model; according to comparison of the level of the calculated perceptual energy with a threshold, selectively determining a modified DCT (MDCT) processing window and a wavelet packet transform (WPT) processing window; by processing audio samples corresponding to the scopes of the determined windows in the MDCT and WPT, converting the audio samples into data on frequency domains; and quantizing the processed data on the frequency domains according to the number of assigned bits.