This paper presents the main method to analyze the dynamic characteristics of power transmission system using the multi-body dynamics, which is based on the concept of subsystem equation, subsystem assembling, and the self-determination technique for the system degree of freedom. We can model the mechanical components of power transmission system easily with the advantage of multi-body dynamics. Based on the theory, a dynamic simulation program was developed to analyze system performances, transient phenomena, and other dynamic problems. The driving performance of automatic transmission was simulated with using the multi-body dynamics and Newtonian method, and the validity of program was proved by comparing the two kinds of result.