What is the best number of gear steps for parallel type hybrid electric vehicles (HEVs) and what are the pros and cons of the power split type HEV compared to the parallel type have been interesting issues in the development of HEVs. In this study, a comparative analysis was performed to evaluate the fuel economy potential of a parallel HEV and a power split type HEV. First, the fuel economy potential of the parallel HEV was investigated for the number of gear steps. Four-speed, six-speed, and eight-speed automatic transmissions (ATs) and a continuously variable transmission (CVT) were selected, and their drivetrain losses were considered in the dynamic programming (DP). It was found from DP results that the power electronics system (PE) loss decreased because the magnitude of the motor load leveling power decreased as the number of gear steps increased. On the other hand, the drivetrain losses including the electric oil pump (EOP) loss increased with increasing gear step. The improvement rate from the 4-speed to the 6-speed was the greatest, while it decreased for the higher gear step. The fuel economy of the CVT HEV was rather low due to the large EOP loss in spite of the reduced PE loss. In addition, the powertrain characteristics of the parallel HEV were compared with the power split type HEV. In the power split type HEV, the PE loss was almost double compared to that of the parallel HEV because two large capacity motor-generators were used. However, the drivetrain loss and EOP loss of the power split type HEV were found to be much smaller due to its relatively simple architecture. It is expected that the power characteristics of the parallel and power split type HEVs obtained from the DP results can be used in the development of HEV systems.