The invention discloses an optical fiber bragg grating on-line monitoring system and method used for monitoring temperature of a gas insulated switch bus of an electric power system. A groove is formed in the segment, covered with a basin-type insulator, of the bus. The monitoring system comprises an optical fiber bragg grating, a wavelength demodulation instrument, a wavelength demodulation module, a displayer and the groove; a grating region of the optical fiber bragg grating adheres into the groove, a leading-out line of the optical fiber bragg grating is connected with the wavelength demodulation instrument, and the wavelength demodulation instrument is connected with the wavelength demodulation module; the optical fiber bragg grating is used for directly sensing the temperature of the gas insulated switch bus and transmitting a reflection spectrum corresponding to the sensed temperature to the wavelength demodulation instrument, the wavelength demodulation instrument receives and transmits the reflection spectrum to the wavelength demodulation module, and the wavelength demodulation module demodulates wavelength signals into temperature signals. The monitoring system is capable of measuring at fixed points, resistant to electromagnetic interference and stable in performance. Meanwhile, the invention discloses the monitoring method of the monitoring system.