The cutter runout effect has significant influence on the shape of the cutter swept surface and the machining surface quality. Due to the existence of cutter runout effect, the shape and position of envelope surface formed by each cutter edge are different from others. Hence, it is necessary to integrate the cutter runout effect and its resulting compound effects of all cutter edges into envelope surface modeling and form error prediction for five-axis milling. This paper establishes the envelope surface model considering cutter runout effect in five-axis flank milling based on the relative motion analysis of the cutter and part. In this model, the cutter runout is defined by three parameters, including inclination angle, location angle, and offset value, and the cutter runout effect is subsequently integrated into the model by using the cutter edge as the generatrix of cutter rotation surface. Then, the influence of each runout parameter on the shape of envelope surface formed by each cutter edge as well as the resulting form error in milling is investigated. Also, the compound effects of all cutter edges on the final resulting geometric errors of the machined surface are analyzed. Finally, simulations and machining experiment are conducted for a specific ruled surface, and the results validate the effectiveness and feasibility of proposed envelope surface model considering cutter runout effect. It is suitable to be used in tool positioning, tool installation adjustment, and forming error prediction in flank milling process with cutter runout.