Belt transmission is one of the most common forms of transmission on CNC lathes. To assess the impact of belt performance on monitoring machining conditions using motor current signal analysis, we developed a dynamic model for belt-driven electromechanical spindle systems. This model enables the coupling of multi-physics variables including mechanical dynamics, particularly the dynamic axil and belt bending motions of belt transmissions and electromagnetic effects. Thus, various changes in belt transmission, including different degrees of belt tension and defects with inherent motor and spindle errors, can be investigated. The modulation characteristics of the current and speed signals revealed that belt transmission can cause a high degree of modulation, reflected by the rich harmonic sidebands at the belt-passing frequency in the motor current spectrum. The rate and extent of belt wear worsened with excessive wear and inadequate tension. It was confirmed that the sideband at the spindle rotating frequency was slightly impacted by changes in the belt conditions. This model was verified based on a CNC lathe induced with different degrees of belt looseness. These conclusions drawn from the numerical analyses can be used for motor current signal analysis, providing reliable and accurate results for machining monitoring.