There exists muchinterference in machining internal spiral groove with big lift angle and small size, whichis a difficult problem. The design and calculation of tool section is analyzed in this paper while differentcutters are utilized to machine the groove when the tool axis is parallel or skew to that of the work piece. The approximating method of using circular-arc cutter is put forward, which is proved by the calculation and analysis to be a feasible method within range of the permissible error. The digital simulation of machining internal spiral groove which is finished by different methods, such as simulation of tool path, error analysis, verification of the cutter design and so on, has been done through typical software such as the Program files function of I-DEAS and the Manufacturing Module of UG.