A parallel-hybrid electric vehicle usually employs two power sources, an engine and an electric motor/generator, to drive a vehicle. Typically, the electric motor receives power stored in batteries to drive the vehicle at low vehicle speeds. Both the electric motor and the engine provide power to the vehicle for maximal acceleration and/or hill climbing. The engine alone drives the vehicle and, at the same time, charges the batteries via the electric motor/generator during highway cruising. And during braking periods, the kinetic energy of the vehicle is used to recharge the batteries. For such a parallel hybrid electric vehicle to function properly, an electro-mechanical system that manages the power flow among the two power sources and the vehicle i necessary. This paper describes the design of an innovative power regulating gearbox. The proposed mechanism can provide a vehicle with six different operating modes including a continuous variable transmission capability to optimize the performance, improve the fuel economy, and reduce the hazardous emissions. To illustrate the capability of the gearbox, kinematics, statics, and power flow analysis are performed for each of the six operation modes.