The quality of tolerance design directly affects performance and manufacturing cost of the product. In order to improve the quality and efficiency of tolerance design in the spindle system, a tolerance design and optimization method based on modeling and simulation was proposed.Simulating the structure and assembly process of the BT40 spindle system, the digital tolerance model of this spindle system was established by CETOL6σ software firstly. Using this model, the contribution and sensitivity of that various main tolerances influence system output accuracy were analyzed. Then, taking the tolerance design scheme by analogy method as the original one, the design effect was inspected by simulating. According to the contribution and sensitivity of various main tolerances, the original tolerance design scheme was modified and optimized finally. The results show that the optimized scheme improve the output accuracy of spindle system observably.