This paper proposes a method and system for harmonic radio frequency identification (RFID) indoor localization with frequency modulated continuous wave (FMCW) radar technology. By implementing the nonlinear transmission line harmonic tag, the FMCW system achieves the separation of transmitting and receiving bands, reduces self-interference, and enables broader bandwidth. By continuously capturing and weakening the spectral leakage during the process of continuous wave signal capture, the spectral resolution of fast Fourier transform (FFT) is improved, enabling high-precision localization. The modulated wave improve the locating reliability in the indoor multi-path environment, comparing to the carrier phase based system. Results show a maximum error of 17.25 cm and an average error of 9.16 cm of the system’s localization accuracy within the 2- meter range.