In this paper, a new identification method for nonlinear time-varying system based on subsystem is proposed. This new method can be used to locate and estimate the nonlinear characteristics of the multi-degree-of-freedom (MDOF) dynamic system without a priori knowledge regarding the system. A MDOF system can be partitioned into a number of different subsystems with a continuous-time model provided by the new method. All the information about the masses and linear or nonlinear connections in the subsystems can be determined with an orthogonality algorithm and an error reduction ratio (ERR) calculation. In this identification process, the time expressions of the time-varying parameters are also given. This new method is demonstrated by a 3 DOF lumped mass system and a mechanical arm structure. This new proposed identification method has a wide application prospect in practical engineering for its simplicity and efficiency.