The complexity of modern power grids, caused by integrating renewable energy sources, especially inverter-based resources, presents a significant challenge to grid operation and planning, since linear models are unable to capture the complex nonlinear dynamics of power systems with coupled muti-scale dynamics, and it necessitate an alternative approach utilizing more advanced and data-driven algorithms to improve modeling accuracy and system optimization. This study employs the sparse identification of nonlinear dynamics method by leveraging compressed sensing and sparse modeling principles, offering robustness and the potential for generalization, allowing for identifying key dynamical features with relatively few measurements, and providing deeper theoretical understanding in the field of power system analysis. Taking advantage of the this method in recognizing the active terms (first and high order) in the system’s governing equation, this paper also introduces the novel Volterra-based nonlinearity index to characterize system-level nonlinearity. The distinction of dynamics into first-order linearizable terms, second-order nonlinear dynamics, and third-order noise is adopted to clearly show the intricacy of power systems. The findings demonstrate a fundamental shift in system dynamics as power sources transit to inverter-based resources, revealing system-level (second-order) nonlinearity compared to module-level (first order) nonlinearity in conventional synchronous generators. The proposed index quantifies nonlinear-to-linear relationships, enriching our comprehension of power system behavior and offering a tool for distinguishing between different nonlinearities and visualizing their distinct patterns through the profile of the proposed index.