A compact and efficient flywheel energy storage system is proposed in this paper. The system is assisted by integrated mechanical and magnetic bearings, the flywheel acts as the rotor of the drive system and is sandwiched between two disk type stators to save space. The combined use of active magnetic bearings, mechanical bearings and axial flux permanent magnet (PM) synchronous machine assists the rotor-flywheel to spin and remain in magnetic levitation in the vertical orientation, while constrains the other four degrees of freedom in radial directions mechanically. The mathematical model of the proposed system has been derived. Three-dimensional finite element method (3D FEM) is applied for studying the performances and verifying the mathematical model of the system. The analysis results support the feasibility of the system.