Internet has become a battle ground between defenders and attackers. The important and first step for a defender of the network is to detect “indicators” of attack. One of the indicators is traffic anomaly. In this paper, we propose an Improved-MSPCA anomaly detection algorithm which can diminish the impact of normal subspace contamination so as to separate the anomalous data more efficiently. Compared to the conventional-MSPCA, our Improved-MSPCA has less parameter setting and lower time complexity. By evaluating on the DAPRA 1999 datasets, the results indicate that Improved-MSPCA can alleviate the effect of normal subspace contamination and achieve a great improvement compared to the other related detection algorithms. In addition, we propose a novel feature-based anomaly detection system which combines sketch data structure and Improved-MSPCA detection algorithm to detect anomalous IP source addresses. Through experiments on the more recent MAWI datasets, the results demonstrate that our system outperforms other related anomaly detection systems.