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Hydraulic retarder is important auxiliary brake device which widely used in commercial vehicles for its economy, safety and driving comfort, however cavitation will occur and reduce the braking performance when hydraulic retarder operates at high speed. In this paper, a model of hydraulic retarder considering cavitation effect was established, and the reliability of the model was verified by comparing with the external characteristics of the product which was obtained from Voith’s official discloses data. Then the cavitation of hydraulic retarder under high-speed working condition was studied by the establishing simulation model. The simulation model can describe and analyze the internal flow field in the hydraulic retarder, and can be used as an important tool for the development and optimization of hydraulic retarder in the future. When hydraulic retarder’s rotational speed is about 1500rpm, the cavitation will be observed in the working chamber.