This paper analyzed the banknote bundling problems in current bank system and designed an ARM-based automatic banknote packaging machine, which integrates with bundling and plastic enveloping. In this paper, the composition and structure of banknote packaging machine, as well as its working principles, software and hardware implementationare described in detail. The actual operating results show that it can accomplish all the motion control in the banknote packaging processes, including sending notes, bundling notes, cutting and sealing plastic film. The new banknote packaging machine has improved the efficiency of banknote packaging.