This paper presents a dynamic model of spindle bearing system combined both angular contact ball bearing (ACBB) and floating displacement bearing (FDB) with the consideration of the spindle housing. In the proposed dynamic model, the dynamic models of ACBB and FDB are developed by discrete element method with each bearing component owning 6 DOFs. The spindle shaft including the tool holder and cutter is modeled by finite element method based on Timoshenko beam theory, and spindle housing is modeled as rigid beam. The coupling restriction of the dynamic system model between dynamic models of bearings, spindle shaft and housing are the forces and response restriction at bearing installation nodes through bearing inner and outer races. Based on the developed spindle bearing system dynamic model, the dynamic frequency response functions (FRFs) of the system under different rotating speeds and time history responses of the system under different cutting forces are investigated and compared with the experimental measured results. The dynamic responses of the system with two different kinds of cutters under different cutting conditions are investigated. Simulated results agree well with the experimental results, and it indicates the effectiveness of the proposed dynamic model of spindle bearing system.