This thesis deals with the requirement to improve the overall fuel efficiency of a vehicle, through the optimisation of transmission layout and the number of gears. This development leads on to research surrounding the specification of the hybrid electric transmission system that is best suited to the case study vehicle. There are many existing papers discussing the energy efficiency and fuel consumption reduction potential of hybrid electric vehicles. However there is comparatively less research concerning the selection procedure of the initial basic mechanical layout of the transmission that is hybridised, which this PhD project addresses. Initially a simulation model of the case study vehicle transmission was created to assess the individual power loss contributions within the transmission, and quantify their individual impact on the overall powertrain efficiency during different driving cycles. The simulation model was validated against experimental test results collected on a vehicle rolling road. Following this, the number of selectable gears influence on the overall powertrain efficiency was analysed. With these findings a fuel consumption improvement of 7.2% for the New European Driving Cycle (NEDC) over the case study powertrain was realised, through the implementation of the improved transmission mechanical specification. A hybrid electric transmission architecture based on the aforementioned transmission mechanical specification was created. This provided an improvement in fuel efficiency over the baseline internal combustion engine driven vehicle, as well as deliver comparable driver comfort during gear shifts through the adoption of electric motor torque filling. Finally an optimal power split strategy for the hybrid electric vehicle was developed, including optimal gear selection. This optimal power split strategy coupled with the improved transmission mechanical specification provides a fuel consumption improvement of 21% over the baseline 7-speed dual clutch transmission (DCT) during the NEDC. Experimental transmission testing for both the baseline DCT and the hybrid electric transmission, OGeco, has been carried out on the University of Surrey HIL transmission test rig. The findings from the transmission efficiency test results correlate with the predicted results found through simulation.