In order to meet the new and aggressive fuel economy standards, rapid development of advanced engine technologies relying upon hybrid powertrains will be critical. However, it won't be enough for manufacturers to just meet emission regulations; they will also need to address reduced fuel consumption, decreased manufacturing costs, consumers' desire for performance such as power and torque, as well as maximization of reliability and quality. Hybrid technologies that can meet EPA demands will involve increased cost, complexity, cooling requirements and battery weight. Add to that the fact that hybrids are fairly new, so that the existing foundation of knowledge is not as strong as for the veteran gasoline engine. Reliable vehicle operation of hybrids will depend upon successful integration and verification of all drivetrain component interactions under varying operational and environmental conditions, such as cold-weather testing of battery capacity. Traditional powertrain testing methodologies have proven the validity of various parts of the system in the virtual world, but total system testing has typically relied upon physical prototypes. With the increased complexity of the hybrid engine involving the integration of mechanical, electronic and software components, it is crucial to develop the system in a virtual environment where ‘what if’ scenarios can be quickly evaluated to make up for the lack of existing experience. There will neither be enough time or resources to physically build and test all the numerous potential scenarios needed to ensure optimal performance of a complete hybrid powertrain system. To manage such increasing complexity, systems engineering has emerged as a collective, integrated multi-disciplinary approach to product development that is easily understood from the product planning to engineering to design to manufacturing perspectives. This paper will explore the modeling, simulation, and analysis capabilities that are available to improve system performance, reduce cost, and maximize reliability of these critical systems through implementation of a Virtual Systems Engineering approach in a timely manner. It provides a comprehensive, collaborative definition across a product's different views (requirements, functional, logical, physical), which allows for a full spectrum of virtual design and simulation capabilities across the enterprise and far beyond the traditional CAD design and core engineering users.