We investigated and identified the conditions necessary for stable dynamic gait generation in biped robots from the mechanical energy balance point of view. The equilibrium point at impact in a dynamic gait is uniquely determined by two conditions; keeping the restored mechanical energy constant and settling the relative hip-joint angle to the desired value before impact. The generated gait then becomes asymptotically stable around the equilibrium point determined by these conditions. This is shown by a simple recurrence formula of the kinetic energy immediately before impact. We verified this stability theorem using numerical simulation of virtual passive dynamic walking. The results were compared with those for a rimless wheel and an inherent stability principle was derived. Finally, we derived a robust control law using a reference mechanical energy trajectory and demonstrated its effectiveness numerically.