Abstract: A quantum-inspired evolutionary algorithm (QEA) based on gray code observation is proposed to overcome the large fluctuation range of quantum and low probability of continuous observation of nearby real number with binary observation mechanism in traditional QEA. Since quantum is good at global searching and gray code is good at local searching, the proposed algorithm can well balance exploration and exploitation. It can make the evolution of quantum more smooth and more efficient. Experiments show that the algorithm can avoid premature and local extreme. Meanwhile, the accuracy and convergence speed are improved.