The finite-element time-domain (FETD) method based on the use of hanging variables to generate nested grids is used as an interface between the coarse and fine grids in the FDTD subgridding method. Since the formulation for treating hanging variables is based on a Galerkin-type intergrid boundary operator, the resulting FDTD subgridding algorithm is guaranteed to be stable. Numerical examples such as the computation of resonant modes of a 3-D rectangular resonant cavity and 2-D TE z scattering by a PEC cylinder and a NACA airfoil are presented to verify the stability and accuracy of the proposed subgridding algorithm.