It is widely accepted that the plug-in hybrid vehicle is the most economically viable near-term solution to the petroleum and CO₂ problems associated with passenger vehicles. The battery and electrics costs of gas/electric plug-in hybrid vehicles can be significantly reduced with the use of a hydraulic transmission and the implementation of hydraulic regenerative braking. This has not been done to date due to the unavailability of a low cost, reliable, compact, and efficient hydraulic transmission. This paper describes a conceptual design of such a transmission and evaluates its performance using the attributes of existing components.The main causes of the lack of past success with hydraulic transmissions are the many drawbacks of variable-displacement hydraulic pumps and motors. This transmission is based on fixed displacement pumps and motors to avoid these drawbacks. The efficiency of the transmission is evaluated under various driving conditions and is equal to or better than present day automatic transmissions due in part to the use of an all-mechanical bypass when cruising. The transmission is configured to allow a continuously variable level of braking torque. The design, construction and performance of this digital hydraulic transmission are detailed. The use of internal gear type pump/motors results in a small size that will allow the transmission to fit within the outline of a typical SUV transmission, offering a low cost way to convert existing vehicles to hybrids. The required accumulator size is discussed.The design eliminates the need for either a friction clutch or torque converter and is scalable such that it is applicable from compact cars to large trucks and buses. A variation is described that is suitable for adding hydraulic regenerative braking to an all-electric vehicle.The technical trend in hydraulic pumps and motors is to higher operating pressures and speeds. Both these trends result in proportional reductions in the size and cost of this style of transmission and increased power handling capability.