Punitive compensation is the creation of common law, it had its origin in Britain, but it got unprecedented development in the United States. So it is beneficial for us to start our study from the research of American academe and judicial system on punitive compensation. The study begins with the definition of punitive compensation, concluding and summarizing the character and function of punitive compensation in a new way. The study also puts forward some legislative suggestions for the establishment of the punitive compensation system in the mainland of China by integrating some legislative experiences in other countries.