Grumman's Design 698 V/STOL is configured to perform multi-mission military roles, including ASW, AEW and Missileer. The aircraft employs a unique V/STOL design, which places all control for hover and transition in the twin turbofan nacelles. This paper presents design and development of the aircraft propulsion system, covering a span of seven years. Initial developmental testing concentrated on two of the key components of the nacelle, the inlet and the control vane assembly. Isolated testing was used to establish baseline designs which eventually were adapted to a TF34 engine for a full scale powered model test of a proposed manned flight demonstrator at the Ames Research Center. During this test, the nacelle design was proven over a range of hover and transition operating conditions. Also included in this paper are discussions of the continued design efforts at Grumman to optimize the demonstrator configuration.