In this paper, we implemented a paper currency recognition system using IR(infrared) sensor. The system has 32 channel IR sensor to measure the reflection and penetration quantity of light. The IR image of paper currency of 10-bit gray scale is used to differentiate the real and counterfeit paper currency with image information from 0 to 4095. The characteristics of IR image are recognized by brightness and darkness and the positions of bright and dark portions are different between real and counterfeit paper currency. The price of IR sensors were relatively high, however, it is good price in these days due to mass production to apply to counterfeit detection area. We used a software table having the IR characteristics of real paper currency to compare with the IR images of the input paper currency. The performance of the implemented system shows 1-2% error rates for Euro real paper currency and 0% error rates for various counterfeit paper currencies of several countries.