An embedded system and method capable of automatically updating system software. The embedded system includes a first storage device for storing a first system software and a boot image; a microcontroller coupled to the first storage device for respectively converting the first system software and the boot image into a system code and a boot code, for controlling booting of the embedded system; and a connecting interface coupled to the microcontroller and further coupled to an external data storage device through a data transmitting media. The external data storage device contains a second system software. The boot code includes an update agent interface programming (UAIP) code utilized for reading the second system software from the external data storage device through the connection interface to update the first system software.