A new simulation method is proposed for dynamic characteristics of cracked rotor based on the finite element analysis, in which the stiffness model has been derived for the exact description of variation rules of cracked shafts. A non-linear dynamic equation is constituted according to stiffness characteristic of cracked-rotor change in time domain. Then the corresponding dynamic equation of the cracked rotor based on FEM analysis is modeled and the numerical simulation is carried out with solutions of high accuracy. At last, the dynamic characteristics of cracked rotor in diverse conditions are analyzed, and the simulation results are compared. It is shown that the non-linear oil film bearing force coupling with periodicity variety stiffness of cracked rotor has a great effect on dynamic behavior of the rotor and that the cracked rotor can be diagnosed effectively by the criterion that the swing of disk center obviously accretes and the wave crest appears when rotation speed is a half critical speed of rotor shaft system.