Widespread use of alternative hybrid powertrains currently appears inevitable and many opportunities for substantial progress remain. The necessity for environmentally friendly vehicles, in conjunction with increasing concerns regarding U.S. dependency on foreign oil and climate change, has led to significant investment in enhancing the propulsion portfolio with new technologies. Recently, plug-in hybrid electric vehicles (PHEVs) have attracted considerable attention due to their potential to reduce petroleum consumption and greenhouse gas (GHG) emissions in the transportation sector. PHEVs are especially appealing for short daily commutes with excessive stop-and-go driving. However, the high costs associated with their components, and in particular, with their energy storage systems have been significant barriers to extensive market penetration of PHEVs. In the research reported here, we investigated the implications of motor/generator and battery size on fuel economy and GHG emissions in a medium duty PHEV. An optimization framework is proposed and applied to two different parallel powertrain configurations, pretransmission and post transmission, to derive the Pareto frontier with respect to motor/generator and battery size. The optimization and modeling approach adopted here facilitates better understanding of the potential benefits from proper selection of motor/generator and battery size on fuel economy and GHG emissions. This understanding can help us identify the appropriate sizing of these components and thus reducing the PHEV cost. Addressing optimal sizing of PHEV components could aim at an extensive market penetration of PHEVs.