This paper presents a new hybrid propulsion system that has been developed to address environmental issues related to the automotive powertrain, based on the view that such systems will be a core automotive technology in the future. To achieve market acceptance, it is essential that hybrid systems do not compromise engine performance or driving performance. The following target performance characteristics were considered to be important in the development of this hybrid propulsion system for the Japanese market. First, driving performance should not be sacrificed for the mere reason that it is a hybrid car. Second, fuel economy should be twice that of gasoline-powered vehicles in the same class under 10-15 test mode operation, or even better. Further, performance in other areas should be comparable to conventional vehicles. The system presented here has two motors for propulsion and energy regeneration. Both are inverter type permanent magnetic synchronous motors. The traction motor is located between the engine and the CVT so as to increase the torque transmitted through the CVT. This also allows the use of a smaller motor. Lithium-ion batteries were selected for this system to provide high efficiency and high heat resistance even with repeated charging and discharging at high power levels in accordance with how a hybrid propulsion system is used. Hybrid propulsion systems are seen as being a key future technology in the automotive industry.