This paper analyzes basic principle and control strategy of direct-drive permanent magnet wind power generation (PMSG) system and builds the simulation model in Matlab/Simulink. The model is proved to be correct by simulation results. This paper also compares accurate generator model and the utility generator model which stator transient is neglected and discusses the applicability of the two models. Simulation results show that the accurate generator model is available to analyze dynamic problem of generator; both accurate generator model and utility generator model can accurately describe grid-connected problems. Finally, the parameters of controllers of direct-drive (PMSG) system is optimally designed by using particle swarm optimization, which improves the system dynamic characteristics. Simulation results indicate the feasibility and the effectiveness of this optimization method.