Variable transmission ratio rack is a key component of the variable transmission ratio steering system for new energy vehicles. This paper presents a novel milling method based on the envelope motion between pinion and rack, i.e., generation of variable transmission ratio rack using a multi-axis CNC milling machine tool by a disk cutter. Firstly, the generation relation among virtual generating cross-section, pinion and rack is derived based on the basic concept of generation of variable transmission ratio rack. To establish the cutter geometry, the cutting surface equation of the disk cutter is obtained based on the generation relation. On this basis, the envelope mathematical model of the proposed rack is derived from the cutter geometry by applying coordinate transformation. The kinematic model of a six-axis CNC milling machine tool is further developed and the machine motion parameters during generating milling for variable transmission ratio rack are studied. Finally, a machining simulation of variable transmission ratio rack is carried out via VERICUT software, verifying the feasibility of the milling method. The research makes it possible to process the variable transmission ratio rack with higher tooth surface accuracy.