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This paper investigates an optimal design of a diesel engine and after-treatment systems for a series hybrid electric forklift application. A holistic modeling approach is developed in GT-Suite® to establish a model-based hardware definition for a diesel engine and an after-treatment system to accurately predict engine performance and emissions. The used engine model is validated with the experimental data. The engine design parameters including compression ratio, boost level, air-fuel ratio (AFR), injection timing, and injection pressure are optimized at a single operating point for the series hybrid electric vehicle, together with the performance of the after-treatment components. The engine and after-treatment models are then coupled with a series hybrid electric powertrain to evaluate the performance of the forklift in the standard VDI 2198 drive cycle.