The design and initial testing of a five axis magnetic bearing system in an energy storage flywheel is presented. The flywheel is under development at the University of Texas Center for Electromechanics (UT-CEM) for application in a transit bus. Calnetix performed the system dynamic analysis, developed the magnetic bearing control algorithms, and developed the digital control hardware to meet the needs of the flywheel system. The bearing system for the prototype features two types of homopolar, permanent magnet bias magnetic bearings: a combination radial/thrust bearing and a pure radial bearing. The backup bearing system features a viscously damped, compliant mount. The system has been successfully tested to the maximum design speed of 42,000 rpm. A gain scheduled, MIMO control algorithm was required to control the system modes affected by rotor gyroscopics. The implementation and basis for this control scheme is discussed. Dynamic test results are discussed relative to the rotordynamic and control system design.