A systematic dynamic analysis of a microsegment gear system with a time-varying base circle, time-varying mesh stiffness, and gear backlash is carried out in this paper. By discretizing the meshing process, a six degree-of-freedom nonlinear dynamic model of a microsegment gear pair is established. To study the dynamic response of the microsegment gear and involute gear under various operating conditions, the numerical integration method is adopted. The dynamic transmission error (DTE) of the two gears is analysed in terms of time history charts, phase diagrams, fast Fourier transformation spectra, and Poincaré maps. The effects of support damping and support stiffness on radial vibration are also investigated. Results reveal that, compared with the involute gear system, the microsegment gear system is more stable at the high-speed condition and has a smaller amplitude of DTE under medium-speed and heavy-load, high-speed, and heavy-load conditions. The support damping and support stiffness have great effects on the resonant peak in the radial direction of the microsegment gear. Both the proposed model and numerical results are expected to provide a useful source of reference for the dynamic design of the microsegment gear system.