The propulsion shafting system of ships is usually supported, in part, by water-lubricated rubber bearings, which often work at mixed or boundary lubrication state under heavy-load and low-speed conditions, resulting in strong friction on the bearing-shaft interface and even abnormal vibration in the overall system. In addition, bearing misalignment can further affect the distribution of friction and consequently change the lateral and torsional vibration characteristics of the shafting system. In this work, the rubber bearing was simplified into parallel-distributed springs and the water film was neglected. The dynamic model of the propulsion shafting system was built with the finite element method and reduced by mode truncation. The coupled effect of bearing misalignment and friction was subsequently analyzed with this reduced model and the fourth-order Runge-Kutta method. Finally, lateral and torsional vibration characteristics of the overall system under different bearing misalignment were obtained, which can be used in the identification or diagnosis of abnormal vibration induced by friction.