In order to reveal the internal dynamic property of short-term traffic flow, the nonlinear analysis method is used to identify the chaotic property of traffic flow which is the basis for the prediction of the traffic flow time series. Traffic flow time series is reconstructed in phase-space based on chaos theory. The embedding dimension and delay time are first calculated via the C-C method. The correlative dimension of attractor is then calculated with the Grassberger-Procaccia method. The largest Lyapunov exponent of traffic flow set is calculated on the basis of the improved small data set method to verify the presence of the chaos in traffic flow time series. A novel multi-step adaptive prediction method is proposed to solve the problem of adjusting the filter parameters of the chaos local adaptive prediction method during traffic flow multi-step prediction. The traffic flow time series are found to have chaotic properties in different statistical scales of 2, 4, and 5 min and show that the improved small data set method can accurately evaluate the chaotic property for traffic flow time series, and that the multi-step adaptive prediction method is capable of effectively predicting its fluctuation, which provides a useful reference for traffic guidance and control.