Energy storage is becoming increasingly important with the rising need to accommodate the energy needs of a greater population. Energy storage is especially important with intermittent sources such as solar and wind. Flywheel energy storage systems store kinetic energy by constantly spinning a compact rotor in a low-friction environment. When short-term back-up power is required as a result of utility power loss or fluctuations, the rotor’s inertia allows it to continue spinning and the resulting kinetic energy is converted to electricity. Unlike fossil-fuel power plants and batteries, the flywheel based energy storage systems do not emit any harmful byproducts during their operation and have attracted interest recently. A typical flywheel system is comprised of an energy storage rotor, a motor-generator system, bearings, power electronics, controls, and a containment housing. Conventional outer flywheel designs have a large diameter energy storage rotor attached to a smaller diameter section which is used as a motor/generator. The cost to build and maintain such a system can be substantial. This paper presents a unique concept design for a 1 kW-h inside-out integrated flywheel energy storage system. The flywheel operates at a nominal speed of 40,000 rpm. This design can potentially scale up for higher energy storage capacity. It uses a single composite rotor to perform the functions of energy storage. The flywheel design incorporates a five-axis active magnetic bearing system. The flywheel is also encased in a double layered housing to ensure safe operation. Insulated-gate bipolar transistor (IBGT) based power electronics are adopted as well. The design targets cost savings from reduced material and manufacturing costs. This paper focuses on the rotor design, the active magnetic bearing design, the associated rotordynamics, and a preliminary closed-loop controller.