Lithium ion (Li-ion) battery capacity selection for hybrid electric vehicles (HEVs) is primarily based on charge/discharge power and life. At high temperatures, battery degradation increases and reduces battery life, but battery internal resistance reduces and improves battery performance. Lithium ion phosphate (LFP) batteries have a maximum allowable voltage limit based on degradation minimization, so the battery capacity is selected large enough to stay within the limit over the entire life of the pack. This paper develops an optimal temperature trajectory for LFP cells to improve their charge acceptance and reduce HEV pack size while maintaining battery life. The proposed algorithm has two strategies. First, the battery pack temperature is increased when its state of charge (SOC) is high because the cell is more likely to exceed maximum voltage limit at high SOC. Second, the battery pack temperature is increased if a high current pulse is expected because higher cell temperature reduces the internal resistance and the corresponding voltage swing. Simulations using experimentally validated battery performance and degradation models demonstrate that up to 30% battery pack size reduction is possible with real-time temperature control due to improved charge acceptance.