Taking granular materials composed of wood particles and clay particles as sample, the rolling motion and separation of density-type binary dispersed granular materials within a cylinder were simulated by using discrete element method. Mixing index of materials was defined by using contact-number between particles, and then transverse separation process was quantitatively investigated by using Hong’s theory—the mechanism of competition between percolation and condensation. The results showed that material bed was composed of active layer and passive layer in radial section, where separation between particles was occurred in the active layer. Condensation mechanism, which was caused by density differences between wood particles and clay particles, made the material bed form a moon-pattern separation form. Then wood particles dispersed to the drum wall and clay particles gathered to the center of bed. Percolation mechanism can be introduced by configuring the radios of wood particle and clay particle. The separation could be avoided when percolation effect and condensation effect were balanced each other. The addition of percolation mechanism was not affected by the size of cylinder drum.