Bearings are divided into two main categories: rolling bearings and sleeve bearings. The sleeve bearings are normally used in electrical machines above 200-hp rating. In this paper, dynamic modeling and simulation of a squirrel cage induction motor with sleeve bearings under oil-whirl fault is performed. The required air gap function under the fault is defined using earlier experimental results. Then, a winding function approach is used for modeling and simulation of the motor with faulty sleeve bearings. Accuracy of the simulation is approved by comparison to the corresponding experimental results. The stator line current harmonics produced by the bearing oil-whirl fault are identified, and the best harmonics as the fault index are chosen considering sensitivity of the harmonics to the fault severity, as well as the load level change and supply voltage unbalance. Selected index is used to determine the severity of oil-whirl fault in sleeve bearing of an induction motor working in a real production line.