This paper presents a study on the system identification of the in-situ output shaft torque measurement system using a non-contacting magneto-elastic torque transducer installed in a vehicle drivline. The frequency response (transfer) function (FRF) analysis is conducted to interpret the dynamic interaction between the output shaft torque and road side excitation due to the road roughness. In order to identify the frequency response function of vehicle driveline system, two power spectral density (PSD) functions of two random signals: the road roughness profile synthesized from the road roughness index equation and the stationary noise torque extracted from the original torque signal, are first estimated. System identification results show that the output torque signal can be affected by the dynamic characteristics of vehicle driveline systems, as well as the road roughness.