In order to enhance high speed stability the composite air spindle system composed of a high modulus carbon fiber composite shaft, powder contained epoxy composite squirrel cage rotor and aluminum tool holder was designed and manufactured. For the optimal design of the composite air spindle system, the stacking sequence and thickness of the composite shaft were selected by considering the fundamental natural frequency and deformation of the system. The analysis gave results that the composite air spindle system had 36% higher natural frequency relative to a conventional air spindle system. The dynamic characteristics of the composite spindle system were compared with those of a conventional steel air spindle system. From the calculated and test results, it was concluded that the composite shaft and the power contained composite rotor were able to enhance the dynamic characteristics of the spindle system effectively due to the low inertia and high speific stiffness of the composite materials.