A system optimization approach has been developed to configure and analyze hydraulic energy-storage based propulsion systems. The powertrain synthesis problem is formulated as an optimization problem of minimizing the engine fuel rate over a finite time interval. The solution process is driven by energy management and control strategies, which determine the transmission ratio and the hydrostatic pump/motor unit displacement such that the engine can be operated at its minimum fuel rate.This approach has identified a powertrain consisting of an automatic four-speed transmission plus a hydrostatic pump/motor unit and accumulator used to regenerate and store vehicle kinetic energy. Within the limitations of our analysis, the hydraulic hybrid system has shown potential for significant improvement in fuel economy over a conventional system. These limitations are: the use of an optimum energy management strategy which may be difficult to capture in a real-time controller; the practicality and transient effects of turning the engine on and off; the packaging of all the subsystems into a vehicle; and the lack of hydraulic noise assessment. Using the approach in this paper, optimal energy management and control strategies have been developed and their effects on fuel economy have been quantified. The analysis has shown that the fuel economy gains are due to turning the engine on and off and to using stored energy to power the accessories and/or launch the vehicle.This research effort has assessed the potential of a hydraulic hybrid powertrain vehicle system. Bounds on the predicted fuel economy gain were determined as a function of sensitivities to subsystem parameters.