More stringent Federal emission regulations and fuel economy requirements have driven the automotive industry toward more sophisticated vehicle thermal management systems to best utilize the waste heat and improve driveline efficiency. The final drive unit in light and heavy duty trucks usually consists of geared transmission and differential housed in a lubricated axle. The automotive rear axles is one of the major sources of power loss in the driveline due to gear friction, churning and bearing loss and have a significant effect on overall vehicle fuel economy. These losses vary significantly with the viscosity of the lubricant. Also the temperatures of the lubricant are critical to the overall axle performance in terms of power losses, fatigue life and wear. In this paper, a methodology for modeling thermal behavior of automotive rear axle with heat exchanger is presented to predict the axle lubricant temperature rise and study the effect of coolant temperature on the axle warm-up and efficiency for a typical EPA fuel economy driving cycle. Thermal axle consists of automotive rear axle with a heat exchanger added to the axle housing to control the axle lubricant temperature using energy from coolant. The proposed multi-mass model allows an assessment of the effect of operating parameters (heat exchanger effectiveness, coolant flow rate, coolant temperature, lubricant viscosity) on the axle performance and driveline efficiency. The model represents a useful tool to optimize coolant energy distribution between axle and other vehicle thermal system devices, and thus to develop more sophisticated thermal system control strategies with variable coolant flow control devices. The model will also be helpful to select axle lubricant for optimum axle performance. The model is validated by comparing model results with experimental data obtained from EPA fuel economy driving cycle vehicle tests.