This paper presents a new FEA approach for brake squeal simulation, the energy flow analysis. It demonstrates that under certain conditions, two system normal modes with equal or close frequencies may start injecting vibration energy into each other, from dynamic friction mechanism. The vibrations, therefore, can “self-grow” (limited cycle), resulting in system instability, such as brake squeal and brake moan. The theoretical conditions for such positive energy flows to occur are discussed. Test examples and application case studies are presented, along with comparison with, and linkage to, complex eigenvalue analysis.