Dynamic response and stability of a rotating shaft-disk containing a transverse crack is investigated. FFT analysis of response amplitudes showed that the 2Ω component (Ω: rotation speed) was excited by crack breathing and could serve as a good index for crack identification. Intensive numerical studies of crack location, crack depth, rotation speed, and sensing position on response amplitudes displayed a feasible technique for the identification of crack depth and crack location. It is achieved by intersecting the two equi-amplitude response curves of two separated sensing probes. Finally, the instability of the system caused by a crack is examined via Floquet theory and the multiple scale method. The stability diagrams, illustrated as functions of crack depth, rotation speed, and damping, are shown and discussed.