The prediction and control of gear vibration and noise has become very important in the design of a quiet, high-quality gearbox systems. The vibratory energy of the gear pair caused by transmission error excitation is transmitted structurally through shaft-bearing-housing assembly and radiates off from exterior housing surface. Most of the previous studies ignore the contribution of components flexibility to the transmission error (TE) and system dynamic responses. In this study, a system level model of axle system with hypoid gear pair is developed, aiming at investigating the effect of the elasticity of the shafts, bearings and housing on TE as well as the contribution of flexible bearings on the dynamic responses. The load distribution results and gear transmission errors are calculated and compared between different assumptions on the boundary conditions. The modal characteristics and dynamic responses by assuming simply-support bearing and flexible bearing have also been compared. The results reveal that the system responses are sensitive to the system elasticity and shaft-bearing flexibility. The proposed approach yields a more in-depth understanding to the gear vibration propagation for use in the design of quiet driveline systems.