Abstract: The concept of amplitude modulation energy ratio coefficient was defined and an algorithm for the coefficient was explained on the base of cyclostationarity analysis on the mathematical model of gear damage vibration signals. Simulation analysis indicates that the method based on cumulant cyclic correlation is effective in suppressing additive stationary noise and in extracting modulation information. Experimental data of localized gear damage was analyzed and the results show that the energy ratio coefficient increases with increasing damage degree in slightly localized gear damage. This coefficient can be used to indicate the localized gear damage degree.