The distributed driving system with electric wheel as key feature has become a major research issue in new energy automobile. However, wheel-edge driving system with reducing gear may cause significant increase of unsprung mass due to introduction of motor and reducer, which is negative to the vehicle maneuverability. As a result, this paper proposed a structural design of two stage reduction wheel-edge driving system which can convert unsprung mass into sprung mass, and established 1/4 three degree-of-freedom vertical vibration system model. Through simulation analysis, the effectiveness of such design was verified. Results showed that two stage reduction wheel-edge driving system can effectively suppress vertical vibration amplitude of automobile body, reduce vehicle dynamic tire loads, and increase riding comfort and tire ground adhesion.