From the man page of system():
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The system() library function uses fork(2) to create a child process
that executes the shell command specified in command using execl(3) as
follows:

execl("/bin/sh", "sh", "-c", command, (char *) 0);

system() returns after the command has been completed.
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So to answer your question, yes it blocks. But you can always call fork() and one of the exec* functions (there is about six of them). That in itself is not blocking, later you can check if the process is completed by calling waitpid(pid_returned_from_fork, &return_code, NOHANG), which is also nonblocking operation.

Honza