The problem for a class of dynamic cooperative advertising in the supply chain with the impact of advertising effort level on brand goodwill is studied. Based on the advertising inhibitory effect, the dynamic model of the brand goodwill is presented. By applying the Hamilton-Jacobi-Bellman(HJB) equation, the optimal advertising strategies are obtained under the decentralized and centralized decision conditions. The optimal advertising cost sharing rate is given under the decentralized decision. The comparison between the two scenarios shows that the optimal advertising effort levels of manufacturer and retailer under the centralized decision are higher than these under the decentralized decision. The two-way subsidy policy is proposed to coordinate the supply chain. The numerical simulation results show the correctness.