The new hydraulic system of torque converter was designed. The dimension structure of valves was designed by theoretical calculation. The dynamic simulation model of hydraulic system of torque converter was established. Then the dynamic characteristics of the system were simulated. The simulation results and the test results from the test bench were compared to validate the simulation model. The results show that the simulation model can match the real system very well and the simulation model was validated. The effects of different parameters of the hydraulic system on the characteristics of the system were analyzed, and also the effects of different parameters of the hydraulic system on the characteristics of the system were analyzed.