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The desire for improved vehicle fuel economy, driven by high gas prices and concerns over energy independence, have sparked interest and demand for hybrid electric vehicles. Hybrid electric vehicle propulsion systems exhibit complex interactions which need to be understood in order to maximize fuel economy over the range of operating modes. Model-based development processes which use vehicle system models capable of representing the functional behaviors with embedded controls are needed for fast, efficient design of vehicle control systems which manage overall energy usage. Model-based vehicle system development processes have been employed for a Dual Drive HEV system. The process for creating these vehicle system models is described along with an approach for using these models to develop HEV systems. Details of key subsystem models and the process for integration of full vehicle implementation level controls are discussed.