Due to stricter emission regulations and more environmental awareness, the powertrain systems are moving toward higher fuel efficiency and lower emissions. In response to these pressing needs, new technologies have been designed and implemented by manufacturers, as a result of increasing complexity of the powertrain systems, their control and optimization become more and more challenging. Virtual powertrain calibration, also known as model-based calibration, has been introduced to advance powertrain development and optimization. The aim is to transfer a part of test bench experiments into virtual environment, and hence considerably reduce time and cost of product development process while increasing the product quality. Nevertheless, virtual calibration has not yet reached its full potential in industrial practice. Volvo Penta has recently developed a virtual test cell named VIRTEC, which is used in an ongoing pilot project to meet the Stage V emission standards. The integrated powertrain system under test includes engine, Exhaust Aftertreatment System (EATS), and Engine Management System (EMS). The objective of this paper is to describe the essential aspects required to further increase the contribution of virtual testing in powertrain calibration activities. These aspects comprise the following: Hardware-in-the-Loop (HIL) system, simulation models, and working process for joint virtual and physical testing to facilitate efficient powertrain development process.