A digital holographic particle tracking velocimetry system is applied to quantitatively study the drop atomization induced by capillary waves, and the breakup caused by increased sound pressure levels. A wavelet-based algorithm is used for particle detection and autofocusing with a wide size range of 20 μm-2 mm. To eliminate the influence of large particles on small particles, a two-step detection method is adopted. Large drops are first characterized and simulated by a diffraction-based model. Then the contributions of the drops are subtracted from the original hologram followed by the detection of small droplets. Finally, the velocity and size distribution of the secondary droplets are obtained from the experimental holograms. The results demonstrate the validity of the digital in-line holographic technique for the atomization and breakup study of acoustically levitated drops.