Abstract: Mathematical models of hydraulic pump-motor and displacement servo system were built up. Characteristics were analyzed according to bode diagram and step-input response. Results of analysis showed that the band width of displacement servo system is small because of low flow gain of servo-valve, whereas the band width of hydraulic pump-motor compared to be wider, and it responds quickly with overshooting. A motor speed closed loop control digital PID controller is given. The PID control parameters as achieved by simulation was used in the velocity control system of pump-motor operating on test-bed and gained excellent dynamic and stable characteristics.