When there is a highlight source in the field of a panoramic annular lens (PAL), the image will be covered by stray light like mist, so it is important to suppress stray light in a PAL system. The main sources of stray light in PAL are analyzed. As to the stray light caused by incomplete transmission of refractive surfaces, a suppression method is proposed, based on which a new PAL system is designed. In order to verify the feasibility of this method, a comparison of stray light performance is conducted between an ordinary PAL system and the new PAL system. The result indicates that in half field angle of 50°～85°, the stray light caused by incomplete transmission of refractive surfaces is reduced by 85% in the new PAL system, while the stray light doesn′t increase in other fields of view.