The investigation studies about increasing powertrain efficiency and reducing exhaust emissions and fuel consumption have been focused on hybrid vehicles for a few decades. However, the investigations are related to improvement of an individual powertrain component or energy management strategy for hybrid vehicles. Therefore, this study investigates the effects of the layout of the three-speed transmission and various gear selection procedures on vehicle performance, component efficiency, and exhaust emissions for same vehicle parameters, gear ratios, and capacity of the components in a parallel hybrid powertrain. Three design alternatives have been modeled and powertrain simulations have been performed according to the three different drive cycles as New European Drive Cycle (NEDC), Federal Test Procedure (FTP-72), and Istanbul Drive Cycle (IDC) using matlab®—Simulink® environment. The main simulation results are given for vehicle performance (acceleration, grading capacity, and maximum speed) and component efficiencies (battery and electric motor), brake-specific fuel consumption, and exhaust emissions of the engine as CO2, CO, HC, and NOx during the operation on the three-drive cycle. The simulation results showed that better vehicle performance, fuel consumption, and exhaust emissions can be achieved separately by changing the layout of the transmission in parallel hybrid vehicles.