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Spindle system is the major mechanical component in machine tools, and its performance is responsible for a significant portion of the total consumed energy of machine tools. Conventional design optimization of spindle system is partially focused on parameter optimization of spindle motor or transmission system, contributing to an increase of the motor efficiency. Given that concurrent interactions among them is complex, very little efforts has been done to conduct integration optimization for optimum energy efficiency. To this end, a new approach of spindle system design is presented with consideration of the above two aspects adequately, to achieve the maximum energy and material efficiency. Firstly, the energy characteristic of spindle system is explicitly modeled on the basis of energy flow analysis. Then, a multi-objective optimization model for parameter optimization of spindle motor and transmission system is developed to take the both maximum energy efficiency and minimum volume as objectives, which is subjecting to a set of constraints with related to the cutting parameters boundary, processing requirements and shifting power losses. Finally, a multi-objective improved teaching-learning based optimization (MO-ITLBO) algorithm is presented to solve the developed optimization model. The performance of the proposed design approach of lathe spindle system is demonstrated through different working conditions. The experimental results indicate that the design of energy and material efficient machine tools can be achieved.