The handling and control of towed cable and body systems onboard surface ships and submarines presents a significant technical challenge to design engineers in the defense and ocean industries. The current approaches rely heavily on the empirical methods and the time-consuming and costly prototype testing. Computer simulation provides a cost effective way to reduce the high risks associated with the towed cable/body system. However, the current dynamic analysis of towed cables is mostly done by the finite difference (FD) method in stead of the finite element (FE) method that is widely used in almost all engineering fields. This paper presents an alternative FE method to simulate the dynamics of towed cable and body system, in which the large rigid body motion is coupled with small elastic deformation. The newly derived FE method is formulated in terms of element nodal positions, which is different from the existing FE methods that use displacements. The alternative FE method solves for the cable position directly in order to eliminate accumulated numerical errors arising from existing FE methods that solve for displacements first in order to obtain the cable position over very long period of time. The alternative FE formulation is implemented and applied to real applications to demonstrate its robustness by comparing simulation results with the experimental and sea trial data.