Dynamic forces between the mating gears are generated due to the mesh deformation, gear eccentricities, transmission error, and gear run-out, which cause excessive vibration and noise. Study and control of these forced vibrations in gear box are vital to prevent any adverse effects on the gears and its supporting structures. Hence, this work presents a novel concept of active vibration control by introducing Active Magnetic Bearings (AMBs) on the shaft of a spur gearbox having conventional bearings as well. The AMB suppresses the response of the system by generating controlled electromagnetic forces based on the gear shaft vibration measurement. The AMB force is applied without any physical contact as opposed to mechanical forces in conventional bearings. A coupled torsional-lateral vibration analysis has been simulated with the effects of mesh deformation, gear eccentricities, transmission error, and gear run-out. The electromagnetic actuator is designed in such a way that a resultant radial control force can be developed with the help of forces in two mutually perpendicular directions. With a feedforward PID controller, the transverse vibration amplitude is observed to be suppressed to a considerable level. The frequency domain analysis is done using a full spectrum, which shows that multiple harmonics of gear mesh frequency is minimized simultaneously.