The dynamic analyses of rotating systems are always a testing task to obtain the definite results. This paper carries the dynamic modelling, analysis and identification of coupled flexible rotor system supported by an auxiliary Active Magnetic Bearings (AMBs). An identification algorithm is used to estimate the dynamic parameters of AMB, and rotor residual mass imbalance. The proposed algorithm is a right method for the analysis of fully levitated rotor on AMBs. Finite element method is used to model the dynamic flexible rotor system with PID controller. A conventional dynamic condensation technique is implemented in the development of identification algorithm to overcome the difficulty in numerical simulation. The least-squares fit technique is deployed to estimate the dynamic parameters in frequency domain. Then the algorithm is extended to find the misalignment forces and moments at the coupling point. Numerical study is carried to check the correctness of the algorithm. The proposed algorithm is yet to be tested to experimental results from a fully levitated rotor test rig supported with AMBs.