The vibration properties of compound planetary gears are more complicated than that of simple ones. This paper aims to investigate the fault properties of a compound planetary gear set in chipped sun gear conditions using model-based method. A three-dimensional lumped-parameter nonlinear dynamic model for the compound planetary gear set is established. This model considers the time-varying mesh stiffness (TVMS), the mesh phase relations, and gear chipping defects. The analytical equations are derived to quantify the TVMS reduction induced by the chipped gear based on the improved potential energy method. Further, the simulations are performed to demonstrate the fault features of sun gears with single or multiple chipped teeth in different gear stages. Moreover, the theoretical derivations are validated through the experimental signals analysis.