Distributed drive electric vehicle (EV) is driven by four independent hub motors mounted directly in wheels and retains traditional hydraulic brake system. So it can quickly produce driving/braking motor torque and large stable hydraulic braking force. In this paper a new control allocation strategy for distributed drive electric vehicle is proposed to improve vehicle's lateral stability performance. It exploits the quick response of motor torque and controllable hydraulic pressure of the hydraulic brake system. The allocation strategy consists of two sections. The first section uses an optimal allocation controller to calculate the total longitudinal force of each wheel. In the controller, a dynamic efficiency matrix is designed via local linearization to improve lateral stability control performance, as it considers the influence of tire coupling characteristics over yaw moment control in extreme situations. The second part adopts a longitudinal force allocator to separate each longitudinal force into motor torque and hydraulic pressure based on actuators' output characteristics. A Carsim and Matlab joint simulation is carried out under the double lane change condition and the simulation results demonstrate that the proposed control strategy achieves a better performance in lateral stability control than that without hydraulic system. It can be concluded that the strategy is able to broaden the working range of in-wheel motor in vehicle stability control.