A rotor-bearing system has been investigated, including internal damping and axial torque using finite dynamic elements. A procedure is presented for dynamic modeling of rotor-bearing system which consist of finite dynamic shaft elements, rigid disk, and bearing and seal. A finite dynamic element model including the effects of rotatory inertia, gyroscopic moments, axial force, and axial torque is developed using the frequency dependent shape function. The natural whirl speeds, stability, and unbalance response of rotor system are calculated on several cases and compared with the conventional finite elements.