We derive the central stellar velocity dispersion function (VDF) for quiescent galaxies in 280 massive clusters with log(M200/M⊙)>14 in IllustrisTNG300. The VDF is an independent tracer of the dark matter mass distribution of subhalos in galaxy clusters. Based on the IllustrisTNG cluster catalog, we select quiescent member subhalos with a specific star formation rate <2 × 10−11 yr−1 and stellar mass log(M*/M⊙)>9 . We then simulate fiber spectroscopy to measure the stellar velocity dispersion of the simulated galaxies; we compute the line-of-sight velocity dispersions of star particles within a cylindrical volume that penetrates the core of each subhalo. We construct the VDFs for quiescent subhalos within R 200. The simulated cluster VDF exceeds the simulated field VDF for logσ*>2.2 , indicating the preferential formation of large velocity dispersion galaxies in dense environments. The excess is similar in simulations and in the observations. We also compare the simulated VDF for the three most massive clusters with log(M200/M⊙)>15 with the observed VDF for the two most massive clusters in the local Universe, Coma and A2029. Intriguingly, the simulated VDFs are significantly lower for logσ*>2.0 . This discrepancy results from (1) a smaller number of subhalos with log(M*/M⊙)>10 in TNG300 compared to the observed clusters, and (2) a significant offset between the observed and simulated M *–σ * relations. The consistency in the overall shape of the observed and simulated VDFs offers a unique window into galaxy and structure formation in simulations.