In the medical field, guidance to follow the surgical plan is crucial. Image overlay projection is a solution to link the surgical plan with the patient. It realizes augmented reality (AR) by projecting computer-generated image on the surface of the target through a projector, which can visualize additional information to the scene. By overlaying anatomical information or surgical plans on the surgery area, projection helps to enhance the surgeon's understanding of the anatomical structure, and intuitively visualizes the surgical target and key structures of the operation, and avoid the surgeon's sight diversion between monitor and patient. However, it still remains a challenge to project the surgical navigation information on the target precisely and efficiently. In this study, we propose a projector-based surgical navigation system. Through the gray code-based calibration method, the projector can be calibrated with a camera and then be integrated with an optical spatial locator, so that the navigation information of the operation can be accurately projected onto the target area. We validated the projection accuracy of the system through back projection, with average projection error of 3.37 pixels in direction and 1.51 pixels in direction, and model projection with an average position error of 1.03 ± 0.43 mm, and carried out puncture experiments using the system with correct rate of 99%, and qualitatively analyzed the system's performance through the questionnaire. The results demonstrate the efficacy of our proposed AR system.