A dynamical model is developed for the rotating composite shaft with shape-memory alloy (SMA) wires embedded in. The rotating shaft is represented as a thin-walled composite of circular cross-section with SMA wires embedded parallel to shaft’s longitudinal axis. A thermomechanical constitutive equation of SMA proposed by Brinson is employed and the recovery stress of the constrained SMA wires is derived. The equations of motion are derived based on the variational-asymptotical method (VAM) and Hamilton’s principle. The partial differential equations of motion are reduced to the ordinary differential equations of motion by using the Galerkin method. The model incorporates the transverse shear, rotary inertia, and anisotropy of composite material. Numerical results of natural frequencies and critical speeds are obtained. It is shown that the natural frequencies of the nonrotating shaft and the critical rotating speed increase as SMA wire fraction and initial strain increase and the increase in natural frequencies becomes more significant as SMA wire fraction increases. The initial strain of SMA wires appears to have marginal effect on dynamical behaviors of the shaft. The actuation performance of SMA wires is found to be closely related to the ply-angle.