Effects of different design parameters on the performance of a hybrid city bus were studied. A system simulation model of the hybrid city bus was developed and used for studying the effects of drive motor torque and vehicle mass on vehicle performance, fuel consumption and stability during regenerative braking. Increasing the maximum torque by 60 % from the nominal value was found to improve the fuel efficiency by 8.3 % when the vehicle was driven on Braunschweig cycle. On the other hand, vehicle stability during regenerative braking was analysed to understand the influence of the braking torque on vehicle stability. This is particularly important when operating at limited traction conditions. In situations where only regenerative braking was applied, the stability was found insufficient.