In this paper loads and stresses exerted on the bevel gears of a differential (differential of Peugeot 405 as a case study) in different operating conditions have been analyzed by using an improved Finite Element Method. For this purpose, various loading conditions, vehicle dynamics and power train forces on differential components have been defined. It has been shown that combination of turning and braking lead to the most severe loading condition. Then, according to the obtained forces, the mechanical behavior of the differential components has been numerically analyzed with a new FEM. In the proposed FEM, the tooth is considered as an identical substructure connected to the next in the circumferential direction while conventional methods assume each tooth as an isolated structure. Also various loading types and element sizes are examined to identify the appropriate loading and meshing. Then stresses and strains have been calculated and compared with standards and data bases. Results have been produced on the basis of strength and fatigue criteria by taking into account the bending and pitting of the gears. It has been shown that the pitting has the major role in designing the gears; and using these results material and hardness for the gears have been selected considering the recommended safety factors.