This paper develops a methodology to optimize the supervisory controller for a heavy-duty series hybrid electric vehicle, with consideration of battery aging and cooling loss. Electrochemistrybased battery aging model is integrated into vehicle model. The side reaction, reductive electrolyte decomposition, is modeled to determine battery aging rate, and the thermal effect on this reaction rate is considered by Arrhenius Law. The resulting capacity and power fading is included in the system-level study. Sensitivity analysis shows that battery aging could cause fuel economy loss by 5.9%, and increasing temperature could improve fuel economy at any given state-of-health, while accelerating battery aging. Stochastic dynamic programming algorithm is applied to a modeled system to handle the tradeoff between two objectives: maximizing fuel economy and minimizing battery aging. The strategy developed by the stochastic dynamic programming improves fuel economy by 8%, and reduces the lithium ion loss by 17% after 9e3 cycles.