Hybridization of vehicle drive train is an important step to increase energy security, reduce crude oil import, improvement of air quality and GHG reduction. Heavy traffic congestion poses a great challenge in improvement of fuel economy. Nowadays urban climatic condition forces the passenger to keep air-conditioning (AC) on; thus further decreasing the fuel economy. In a typical urban drive; the vehicle commutes with low speed forcing IC Engine to run in its low efficiency operational points. Further it is characterized by frequent start-stop and crawling. It has been observed that the power consumption for AC is comparable to that required for the vehicle propulsion. Hence the AC on condition with propelling vehicle demands higher power from engine creating a challenge for fuel economy improvement. It is observed in literature and simulation exercises that the fuel economy sharply falls with AC on condition in urban drive cycle and worsens in frequent start-stop and city traffic crawling. A study is required to study the improvement of fuel economy in a hybrid vehicle with AC on condition. Most of the work published in literature focuses on improvement in fuel economy with hybridization without air-conditioning operational.The paper describes the techniques to improve fuel economy of a hybrid electric vehicle with AC on condition for a typical urban and city traffic crawling conditions. The hybrid configuration selected for study is a parallel hybrid with dual AC clutch which enables the drive of AC compressor by electric motor or IC Engine. Different hybrid control strategies for AC control, with compressor driven by IC engine alone; electric motor alone and blend of both were simulated for fuel economy on various city and city traffic drive cycles. The AC compressor drive control was based on vehicle speed; gradient requirement; Battery SOC; idle start-stop conditions and gear engaged. The control strategy parameters for IC Engine shut-off at different battery SOC levels; torque split quantity from both electric motor and IC engine for vehicle propulsion and AC compressor load sharing by electric motor and IC engine, based on battery SOC and vehicle demand were optimized to achieve maximum fuel economy. An improvement of 25-30 % in fuel economy was achieved with optimized AC control over the conventional vehicle in all city traffic conditions. All the simulations were done without downsizing the AC compressor; thus providing the same comfort to the passenger as experienced in conventional vehicles.Thus it has been found out that optimized control of Dual clutch AC in hybrid vehicle plays a significant role in fuel economy improvement. The enhanced performance of the hybrid vehicle is achieved with keeping the AC capacity at par with the conventional vehicle.