Tooth root bending stress and surface contact stress are two major determinants of the load carrying capacity of gear drives. Generally, a high contact ratio has the potential to enhance the gear strength. In this paper, the basic procedures and methods for constructing a high-contact-ratio (HCR) internal spur gear pair with the arc path of the contact are presented. The effects of design and modification parameters such as deflection angle, modification angle, and addendum coefficient on gear drive are analyzed in detail based on 2D finite-element models (FEMs). A comparison of experimental and finite-element analyses (FEA) of the bending stress, contact stress, and contact ratio between HCR and involute internal spur gear drives was conducted to demonstrate the advantages of the HCR gear drive in terms of load capacity. The results show that appropriately increasing the deflection angle and addendum coefficient is beneficial for reducing bending and contact stresses. It was also observed that the bending and contact stresses of a HCR pinion are lower than those of an involute one. Moreover, the contact ratio increases with input torque.