A prism system and method for eliminating color aberration in an illumination system of a micro projector is disclosed. A light beam enters into a first prism through a light incident surface thereof and is further emitted through a light-emitting surface of the first prism. The light beam then enters into a second prism through a first interface thereof, passes through a second interface of the second prism and reaches a digital micromirror device (DMD). The light beam is reflected by the DMD so as to pass through the second interface and reach the first interface. The light beam is totally reflected by the first interface so as to be emitted through a third interface of the second prism. Therefore, the invention eliminates lateral color aberration that occurs in an active area of the DMD, reduces costs of illumination equipment and achieves a preferred projection effect.