The effective analysis modeling of a power transfer unit (PTU) with the finite element method was conducted to investigate gear-root bending fatigue. This PTU was designed for an AWD/4WD vehicle system. The hypoid gear plays an important role in PTU systems. The finite element (FE) model is useful to consider various stiffness components and is regarded as the most suitable and effective tool as computer performance increases. Without a proper introduction of system stiffness, we cannot exactly predict fatigue failure life in FE analysis. In this study, a simulation model was developed with the focus of affecting gear-mesh misalignment, such as gear-body flexibility, shafts, bearing stiffness and gearbox stiffness. To validate the results, we did a correlation study of fatigue failure life between physical test results and fatigue life analysis results. Prior to this fatigue analysis, the system torsional stiffness was correlated between physical tests and virtual analysis. Next, loaded tooth contact analysis (LTCA) was conducted to compare the experimental and simulated results. The proposed integrated FE model for predicting the fatigue life of hypoid gear roots based on the full system agrees well with the results of the physical durability test. Moreover, the developed FE model is becoming competitive in terms of computational costs.