The lateral vibration of bottom hole assembly (BHA) has a great effect on its fatigue life, and causes well trajectory control problem. A nonlinear dynamic model of BHA was set up under the considering of the interaction between bit and rock, the dynamic coupling between axial, lateral and torsional vibrations, and the contact between BHA and borehole well. The lateral vibration characteristics of BHA were studied by utilizing the finite element method. The results showed that the lateral vibration of bit was obvious and stochastic during drilling., and its vibration strength belongs to the unsafe level account to the standard provided by the Baker Hughes INTEQ Co. As drill collar's distance from bit increased, the lateral vibration strength almost decreased exponentially, and tended to be constant after its distance achieved 50m. The vibration strength of drill pipe was similar with that of the drill collar near bit. The lateral vibration of BHA would get worse when either RPM (revolution per minute) or WOB (weight on bit) increased. This paper provides a new method for the study of the dynamic characteristics of BHA, and also, offers a guidance for the choices of drilling parameters and bottom hole assembly.