Inlet recirculation is proved as an effective way for centrifugal compressor surge margin extension, and is successively used in some engineering applications. Unfortunately its working mechanism is still not being well understood, which leads to redesigning of inlet recirculation mostly by experience. Also, most study about inlet recirculation is steady to date. It is necessary to study surge margin extension mechanism about inlet recirculation. To expose the mechanism in detail, steady and unsteady numerical simulations were performed on a centrifugal compressor with and without inlet recirculation. The results showed that, with inlet recirculation, the inlet axial velocity is augmented, relative Mach number around blade tip leading edge area is significantly reduced and so is the flow angle. As the flow angle decreased, the incidence angle reduced which greatly improves the flow field inside the impeller. Moreover, inlet recirculation changes the blade loading around blade tip and restrains the flow separation on the blade suction side at the leading edge area. The unsteady results of static pressure around blade surface, entropy at inlet crossflow section and vorticity distributions at near tip span surface indicated that, at near stall condition, strong fluctuation exists in the vicinity of tip area due to the interaction between tip leakage flow and core flow. By inlet recirculation these strong flow fluctuations are eliminated so the flow stability is greatly enhanced. All these improvements mentioned above are the reason for inlet recirculation delays compressor stall. This research reveals the surge margin extension reason of inlet recirculation from an unsteady flow viewpoint and provides important reference for inlet recirculation structure design.