The valves used in digital displacement motor (DDM) must satisfy four requirements: fast switching response, high flow rate capability, low pressure difference and low throttling losses. A novel two-position three-way spool valve with middle dead-zone and sleeve-moving structure was designed for the requirements. The steady and transient flow force of the moving sleeve decreased, which sped the valve switching. The pressure difference across the valves decreased with the help of dead-zone structure by compressing or decompressing oil in piston volume. The sleeve's kinematics and CFD model were built to verify its fast switching response and large flow rate capability. The instantaneous pressure in one piston chamber was also modeled to analyze valve-opening pressure difference and valve throttling losses at different motor speeds and valve-closing angles. The optimal dead-zone length was found by making the pressure difference small at different load conditions. These analysis reveals that there is always an optimal closing angle corresponding to different motor speeds, which makes the valve opening pressure difference and valve throttling losses all very small simultaneously. Theoretical and simulation research indicates that the novel high-speed on/off valves can greatly satisfy the requirements.