Concerning the problems of large number of parameters, poor real-time performance and low accuracy of traffic sign recognition algorithms based on deep learning, an improved traffic sign recognition algorithm based on YOLO v3 was proposed. First, the depthwise separable convolution was introduced into the feature extraction layer of YOLO v3, as a result, the convolution process was decomposed into depthwise convolution and pointwise convolution to separate intra-channel convolution and inter-channel convolution, thus greatly reducing the number of parameters and the calculation of the algorithm while ensuring a high accuracy. Second, the Mean Square Error (MSE) loss was replaced by the GIoU (Generalized Intersection over Union) loss, which quantified the evaluation criteria as a loss. As a result, the problems of MSE loss such as optimization inconsistency and scale sensitivity were solved. At the same time, the Focal loss was also added to the loss function to solve the problem of severe imbalance between positive and negative samples. By reducing the weight of simple background classes, the new algorithm was more likely to focus on detecting foreground classes. The results of applying the new algorithm to the traffic sign recognition task show that, on the TT100K (Tsinghua-Tencent 100K) dataset, the mean Average Precision (mAP) of the algorithm reaches 89%, which is 6.6 percentage points higher than that of the YOLO v3 algorithm; the number of parameters is only about 1/5 of the original YOLO v3 algorithm, and the Frames Per Second (FPS) is 60% higher than YOLO v3 algorithm. The proposed algorithm improves detection speed and accuracy while reducing the number of model parameters and calculation.