Today uncertainties of petroleum supply and concerns over global warming call for further advancement of green vehicles with higher energy efficiency and lower green house gas (GHG) emissions. Development of advanced hybrid electric powertrain technology plays an important role in the green vehicle transformation with continuously improved energy efficiency and diversified energy sources. The added complexity of the multi-discipline based, advanced hybrid powertrain systems make traditional powertrain design method obsolete, inefficient, and ineffective. This research follows the industrial leading model-based design approach for hybrid electric vehicle powertrain development and introduces the optimization based methods to address several key design challenges in hybrid electric powertrain and its control system design. Several advanced optimization methods are applied to identify the proper hybrid powertrain architecture and design its control strategies for better energy efficiency. The newly introduced optimization based methods can considerably alleviate the design challenges, avoid unnecessary design iterations, and improve the quality and efficiency of the powertrain design. The proposed method is tested through the design and development of a prototype extended range electric vehicle (EREV), UVic EcoCAR. Developments of this advanced hybrid vehicle provide a valuable platform for verifying the new design method and obtaining feedbacks to guide the fundamental research on new hybrid powertrain design methodology.