With a classical 4 degrees of freedom linear dynamic model of vehicle-trailer system in the yaw plane, preliminary study on lateral stability is carried out by means of analyzing systems damping ratio. The results show that structural parameters have important influence on lateral stability of vehicle-trailer system. Based on that study, a concept of critical velocity with zero damping ratio as an index is present. With the help of MSC.ADAMS, a multi-body dynamic model of a real vehicle-trailer system is built subsequently and the dynamic responses of vehicle-trailer system running on flat road and rough road is simulated respectively. The simulation results indicated that the characteristics of lateral stability of both of the linear dynamic model and the multi-body dynamic model running on flat road are similar. The critical velocity of multi-body dynamic model running on rough road decreases due to the disturbance from road. Since effects of road, nonlinear wheels, suspension structure and load transfer are taken into consideration, multi-body dynamic model of vehicle-trailer system running on the rough road could be more perfectly characterizing the lateral stability of vehicle-trailer system.